Culver signs early retirement incentives for Iowa employees

The head of Iowa's largest state-employees union applauded an early-retirement incentive signed into law Wednesday that he predicted will preserve jobs and save up to $60 million in state government costs.

“This bill is a win-win for many, many people in this state,” said Danny Homan, president of American Federation of State, County and Municipal Employees (AFSCME) Council 61, who was among scores who witnessed Gov. Chet Culver sign Senate File 2062 into law in the Capitol rotunda.

Under the new law, eligible state workers who are 55 years or older with at least 10 years of state government service would have until June 24 to take an early-retirement incentive that would provide health insurance and monetary benefits for five years.

Proponents contend that offering senior state workers an early-out benefit will reduce the state's workforce, save up to $60 million over the next fiscal year and elevate younger employees with fresh, innovative perspectives. Opponents question whether the cost-savings and promised downsizing actually will materialize.

“This is a $60 million step forward,” said Culver, who called the early-retirement legislation a key element of overall efforts to cut government costs by more than $300 million.

“We're doing what hard-working families across the state are doing and that is tightening our belt during these tough economic times,” Culver said. “We'll be stronger, leaner and a better government because of this.”

Under the concept initially proposed by Culver, eligible employees who have worked for the state for at least 10 years and up to 25 years could receive $1,000 for each year of service, up to a $25,000 maximum paid in five equal yearly installments beginning next September. They also would get paid for unused vacation time and up to five years of health insurance.

Ray Walton, director of the state Department of Administrative Services, said as many as 2,700 state employees would be eligible to request the incentives and he expected between 1,200 and 1,300 to do so.

“It's going to save jobs because, as these older folks walk out the door with some dignity and retire, we may be able to retain the younger folks who may be laid off come July of next year if these older folks don't retire,” Homan said.

“I believe there are savings in this because we are taking out people who are at the top of the pay grade and, if we replace them, we get an immediate 40 percent savings on salary,” he added.

S.F. 2062 would prohibit agencies from filling vacancies created by retirements through the program without approval by the state Department of Management. The bill also would prohibit those retirees from resuming state employment.

Culver proposed the early-retirement concept after state revenues plunged last year, forcing him to order a 10 percent across-the-board cut as part of an effort to reduce state spending by nearly $600 million during the current fiscal year.

A consulting firm hired by the governor to identify efficiencies and savings projected a $59.8 million benefit via an early-retirement incentive. The nonpartisan Legislative Services Agency estimates the savings in fiscal year 2011 would amount to $57.4 million and would total $189.4 million over five fiscal years for all state funding sources.

State Auditor David Vaudt said Wednesday he expected $31 million of the savings would be outside the general fund for positions financed by outside sources, such as the state's road use tax fund.