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Legislative Action

The AFSCME settlement:
restructuring penury


In June Council 31 of the American Federation of State, County and Municipal Employees (AFSCME) Illinois reached agreement on a three-year contract that became effective July 1. AFSCME members will see four separate increases in their paychecks, beginning in January. Workers will also see higher employee charges for health insurance as part of a state effort to curb costs.

AFSCME represents 44,300 of the 64,500 state workers in departments and agencies under the governor. Other unions, including the Teamsters and the Illinois State Employees Association, represent 17,000 workers.

The governor's Bureau of the Budget projects the state's net cost from the contract at $247 million over three years. Salary increases and state assumption of pension contributions previously paid by employees total $482 million. The bureau puts the total savings at $235 million: $85 million from changes in Illinois' self-insured health insurance program for state workers and $150 million from a new early retirement program.

The restructured health insurance program includes higher deductibles and copayments for employees. On January 1 most state employees (AFSCME workers and all others) will begin to pay a small portion of the basic health insurance that had been provided free to workers. The monthly fee is on a sliding scale with no fee for those earning less than $20,000 per year and a maximum fee of $12.50 for those earning more than $50,000 per year.

As always, state workers must pay for dependent coverage. The current $104 per month premium for two or more dependents will rise to $120 on January 1; to $131 on July 1, 1992; and to $145 on July 1, 1993.

There will also be an increase in the deductible that employees themselves must pay before the health insurance begins to pay. The annual deductible will be $ 150 for those earning less than $40,000; $250 for those earning from $40,000 to $49,999; and $300 for those earning $50,000 or more. The deductible for dependents will remain at $100 per year.

New carrots and sticks will encourage state workers to use preferred provider organization (PPO) hospitals, facilities with which the state has negotiated favorable rates for services. Employees who use PPO facilities now pay 10 percent of covered costs. That percentage will drop to 5 percent on July 1, 1992. After that date, employees who live within 25 miles of a PPO hospital and utilize a non-PPO hospital will be subject to 40 percent copayments, twice the current 20 percent copayment for non-PPO hospitals.

The new contract also carries changes in dental insurance coverage. State employees who had not been charged for the existing dental insurance plan will pay monthly premiums of $2.50 per month for the employee, $5 per month for the employee and one dependent and $7.50 per month for the employee and two or more dependents.

Impact of AFSCME contract on all appropriated funds spending

Fiscal year 1992



$ 53 million


$ 87 million

net savings

$ 34 million

Fiscal year 1993



$168 million


$ 86 million

net cost

$ 82 million

Fiscal year 1994



$261 million


$ 62 million

net cost

$199 million

Total (fiscal 1992 to 1994)



$482 million


$235 million

net cost

$247 million

Source: Bureau of the Budget.

A second dental plan, called managed care, will be offered all workers, without charge. Illinois contracts with dentists, and the employee must select a dentist from that pool. Benefits are better than under the original plan.

Besides the health insurance savings, the Bureau of the Budget projects $50 million in annual savings from early retirement by state employees. The early retirement program was passed as part of the budget-balancing S.B. 45 at the end of the session. It gives certain state agency employees the option to purchase up to five years of service credit at half the normal cost and thereby retire early. Workers must decide by December 1 whether they wish to retire and must, with a few exceptions, retire by January 1.

The state projects that approximately 4,000 of the 14,000 workers eligible for the program (active employees at least 50 years old or with at least 30 years of service) will retire. Edgar has enforced the $50 million savings by directing agencies to create a reserve in their personnel spending.

On the cost side of the AFSCME contract, effective January 1 the state will pick up all or part (depending upon the pension plan) of the employee contribution for pensions. In effect those workers will see higher paychecks after January 1. For most workers the state will begin making the 4 percent of salary pension contribution now made by employees. For workers with more expensive pension plans, such as police officers, prison guards and firemen, the state will make the 5.5 percent of salary contribution now made by employees.

The contract also calls for direct salary increases of 2.5 percent on July 1, 1992; 2.0 percent on January 1,1993; and 5.0 percent on July 1, 1993.

The money to cover the pension pickup came from the early retirement plan. Attempts to pass a similar plan for university workers stalled in the General Assembly under criticism that it would create a "brain drain." That leaves 41,600 state workers employed by public universities with higher health-care costs but no pension pick-up and no early retirement option.

Although Illinois will see an overall savings from the AFSCME contract in this fiscal year, costs will overtake savings when the postponed raises kick in. Finding the $199 million to cover the fiscal year 1994 net cost of the settlement will challenge future budget makers. Before then the settlement will create pressures for wage increases for other workers.

November 1991 /Illinois lssues/21

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