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Do IT this week: Layering
Published on Tuesday, Jan 15, 2008
COLUMBUS: The state of Ohio wants to downsize.
Gov. Ted Strickland has asked his agencies to look into offering employees early retirement incentives to save money in light of a potential recession and continued state budget problems.
Agencies were told Jan. 7 to begin looking at ways to trim their work force by offering to purchase additional years of service for long-term classified, primarily union, employees, allowing them to retire early.
The agencies would need to demonstrate savings before extending the voluntary buyouts, although in some cases the offers would be mandatory because of state law and union agreements.
In the memo from J. Pari Sabety, Strickland's director of the Office of Budget and Management, it appears the administration is contemplating closing some state institutions or laying off relatively large numbers in state departments.
Keith Dailey, Strickland's spokesman, said no decisions have been made on either idea.
''The governor is prepared to make the tough choices that may have to be made over
time,'' Dailey said.
He said the cost-saving option is being extended to all state government, and the governor shared the contents of the memo at a recent Cabinet meeting.
''This is guidance to the agencies. It is the how-to. It's updated guidance and something that's been in discussion at OBM for several months,'' Dailey said.
The state's economy is facing significant challenges, in large part because of the slumping housing market and rising energy costs, so the governor is monitoring the budget day to day, Dailey said.
''We're expecting slower growth in '08 than we had in '07 and the governor is committed to living within our means,'' Dailey said.
No timeline has been given to agencies to submit plans and the governor does not have a specific dollar amount in mind for savings, Dailey said.
Developing a plan
Under the proposal, state agencies would need to develop plans for mandatory and voluntary buyouts. OBM would review each agency's proposal, and notify the Public Employees Retirement System (PERS) of approved plans.
The OBM would receive reports starting six months after the early retirements begin that would outline details of a department's payroll before and after the downsizing.
A mandatory buyout would have to be offered if the state either closes an institution or, within a six-month period, lays off 50 employees or 10 percent of the personnel in any ''employing unit,'' which means a department, agency, state college, board, commission, bureau, council, office or administrative body.
Under the voluntary plan, an agency would need to document a timeline to meet projected savings and outline the savings either through eliminating a position or hiring someone new at a reduced salary to replace a retiree.
The voluntary plan calls for an agency to offer an early buyout to at least 5 percent of the eligible employees within the agency, and the agency would be restricted in purchasing early retirement credits.
Purchased credits, in which the state buys service time for an employee to increase his or her years on the job for purposes of calculating monthly benefits, would be limited to three years or no more than 20 percent of an employee's total state service.
The offer to take the buyout would have to be on the table for one year.
Mandatory early retirement incentives would not exceed two years of purchased service, and the offer would be open from the time of the announcement until the actual date of the layoff or closing.
No cash for directors
Strickland, however, is making sure that unclassified employees that he can fire almost at will are not going to cash in on the offer.
In Sabety's memo, the director explains that ''it is important to note that directors, assistant directors, deputy directors and any other administration appointees shall not participate in the . . . (early retirement incentive) plans offered by any agency.''
Unclassified employees serve at the pleasure of the governor or agency director, so offering them a buyout would be ''an unnecessary and inappropriate use'' of public money.
Peter Wray, an Ohio Civil Service Employees Association (OCSEA) union spokesman, said many departments, such as mental health, mental retardation and developmental disabilities and youth services, are facing shortages and would be hard-pressed to reduce their numbers.
OCSEA represents about 36,000 state and local government employees.
Wray acknowledged the proposal allows agencies to reduce costs by replacing higher-paid workers with lower-cost employees, but he said his experience is the subsequent hiring often doesn't take place.
''It's easier said than done,'' Wray said.
The governor did not share the early retirement plan with Republican leaders in the Ohio House and Senate.
Strickland decided to look into cost-containment options after the state's December financial report outlined the budget challenges facing Ohio.
Recession warning
January's report, issued three days after Sabety's memo, warns of an impending recession.
In the newest financial forecast, Sabety warns Strickland that Ohio's employment is flat, personal income can support only moderate growth in consumer spending and the leading national economic indicators are more negative now than at any time since the 2001 recession.
In November, Ohio employment increased by 7,800 jobs after declines the previous two months. But the total was still down 8,300 from November 2006.
Figures for the Midwest are disturbing too, where manufacturing production increased 0.5 percent in November while new orders fell to the lowest level since the 2001 recession. Housing starts in the Midwest fell 6.8 percent in November, down 20.4 percent from a year earlier.
Across the country, state tax receipts hit a four-year low and state income tax receipts dropped to a three-year low. There also is a downturn in economic activity in the wake of a surge in oil prices and a tightening of lending terms.
Dennis J. Willard can be reached at 614-224-1613 or dwillard@thebeaconjournal.com.
COLUMBUS: The state of Ohio wants to downsize.
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