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State benefits account for about a quarter of personnel costs; governor recommends more conservative health‑insurance funding
Summary
LFiscal analysts told JFAC that state benefits make up roughly 25 percent of personnel costs, health insurance is the largest single component, and the governor recommended a higher per‑position health appropriation to avoid over‑reliance on reserves.
Legislative staff briefed the Joint Finance‑Appropriations Committee on how employee benefits are budgeted and how those costs affect agency personnel budgets.
Frances Lippitt, a budget and policy analyst with the Legislative Services Office, said benefits typically represent about a quarter of personnel expenditures. Health and dental insurance account for almost half of benefits spending, while variable benefits — including the state pension (PERSI), Social Security, Medicare and workers’ compensation — are budgeted as a percentage of salary.
Health insurance funding
Lippitt said the budget process uses an appropriation per full‑time position (FTP) to fund health premiums. The state carries a minimum reserve equal to 10 percent of expected premiums; the actuarial recommendation used by the governor would appropriate $14,300 per FTP for FY2026 to cover plan costs in 90 percent of scenarios. That change would cost about $56.6 million on the general fund compared with an alternative appropriation closer to $13,960 per FTP.
PERSI and variable benefits
Lippitt said employer PERSI contribution rates used in the presentation were 11.96 percent for general members, 14.65 percent for public safety employees and 13.47 percent for teachers; employer contributions for fiscal year 2024 were about $141.5 million. Combining variable benefits and health insurance, the total benefits share of compensation can vary substantially by salary level.
Why it matters: benefits are a material portion of total personnel costs and therefore affect agencies’ ability to deliver services. Lippitt told the committee that changes to the benefits appropriation or to compensation decisions driven by the Change in Employee Compensation committee will flow through agency budgets.
Next steps
The joint Change in Employee Compensation (CEC) committee will review compensation recommendations, including benefit posture and health‑insurance assumptions, and will present compensation recommendations to JFAC for incorporation into program maintenance and appropriation decisions.
