March 2011 reporter

THE

Publication of the State Employees Association of North Carolina • SEIU Local 2008 • March 2011 • Vol. 29 No. 2 • Circulation 55,000

State Employees Ask Pols to Take Pride in Carolina: Working Families or Corporate Welfare?

By Toni Davis

3 Things To Do PHOTO BY Shawn Rocco/The News & Observer

for Lobby Day Register

at www.seanc.org

Schedule

appointments with your legislators

Arrive Promptly

in SEANC blue, prepared to tell your story

SEANC District 22 member and Department of Health and Human Services Dental Hygienist Bonnie Johnson, left, knows first-hand that North Carolina citizens and their families will suffer if lawmakers cut essential public services.

RALEIGH – This year SEANC members are asking North Carolina’s politicians to “Take Pride in Carolina” when they craft the state budget. With an estimated $2.4 billion budget gap, lawmakers will have the choice to lay off employees who provide quality public services or continue to give tax breaks to corporations.

This choice is no joke. On a near daily basis, articles appear in newspapers, stories are broadcast on the evening news and discussions take place on your neighbor’s porch trying to make state employees the scapegoats of North Carolina’s budget crisis. State employees take enormous pride in serving the state of North Carolina; it’s time for politicians and taxpayers to do the same. With the budget deficit in mind, politicians talk about cutting state jobs and benefits as if there were no other options to solve the problem.

Save Our State

Last winter when the budget deficit was forecast, SEANC launched the “Save Our State” initiative to collect members’ ideas and suggestions on how state employees could take the lead in identifying cost-savings. SEANC members responded in droves and those suggestions resulted in the “Take Pride in Carolina” report, which outlines over $10 billion in budget options, more than three times the amount of the current deficit.

The report offers legislators a stark choice between working families and wealthy corporations by presenting budget options that expand the revenue base, eliminate corporate tax loopholes and stop corporate welfare. It provides common sense solutions to solve the budget deficit crisis – from selling unused heavy equipment in the Department of Transportation to closing the corporate tax loophole

allowing parent corporations and their subsidiaries to file separate tax returns.

If legislators are looking to fill a $2.4 billion budget shortfall, this report contains some obvious solutions! Here’s a great example of the lunacy found in the tax code: each year, North Carolina is giving away $6.1 million in breaks for tobacco distributors or wholesalers that file their tax reports on time. Are you, the citizen taxpayer and state employee, getting a tax break just for following the rules and filing your taxes on time? No. The report was delivered to legislators the same week as Gov. Bev Perdue’s Feb. 14 State of the State address.

Lobby Day

at the General Assembly Wednesdays (8:30 a.m. – 3 p.m.)

March 16

Eastern Lobby Day

March 23

Central Lobby Day

March 30

Western Lobby Day

Eliminate Corporate Welfare

“It’s time to take a look at who’s really at fault for today’s recession. The state must close corporate tax loopholes and giveaways before a single quality public service is cut,” said SEANC Executive Director Dana Cope. “It’s not fair for legislators to give away the store to businesses and corporations through cash incentives and tax exemptions while also glad-handing voters. They are cutting quality public services that taxpayers depend on and we will not allow it.”

If you have had enough of politicians and the media using your valuable public service as a scapegoat for the state’s budget crisis and you want to close corporate tax loopholes, join your colleagues and fight back! You can access information about SEANC’s “Take Pride in Carolina” lobby days and rallies at www.seanc.org or call Carri Derrick at 800-222-2758 for assistance in scheduling legislative appointments. tdavis@seanc.org

Save the Date

for Hometown Rallies Saturdays (12 – 12:45 p.m.)

April 9

Western Rally, Morganton Judge’s Riverside Restaurant

April 16

Eastern Rally, Greenville H. Boyd Lee Park

April 30

Central Rally, Raleigh Bicentennial Mall *Please note that members are welcome to come to any lobby day or rally, no matter their region.

THE REPORTER MARCH 2011

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public policy

State Health Plan –

The Time for Reform is NOW!

By Cary Edgar As determined by SEANC’s delegates during the 2010 convention, on the list of legislative priorities for this session is a call to move oversight of the State Health Plan (SHP) from under the auspices of the Majority Leaders of the Senate and House to a government agency. With North Carolina facing a $2.4 billion budget shortfall, legislators could bring hundreds of millions of dollars in savings to the state’s coffers by moving oversight of the SHP. Increased transparency of Blue Cross and Blue Shield of North Carolina’s no-bid, sweetheart contract may also mean that the deal would be opened up for a new bid from different insurance providers.

With new legislative leadership in place at the General Assembly, now is the perfect time to enact major reform for the SHP, which continues to need additional investment just to keep afloat. Last year, an extra $658 million was needed from the budget to prop up the system. An overdue step in the right direction will be the retirement of SHP Executive Director Jack Walker, which is currently slated for July.

“It’s past time to make this happen,” said SEANC Legislative Affairs Director Ardis Watkins. “State employees, retirees and their families – already suffering in this tough economy – are doubly burdened by cost overruns caused

by Blue Cross’ greed. This situation is bleeding the state dry and ironically, it’s entirely avoidable. As we always have, SEANC lobbyists and staff stand ready to show legislators how wasteful the Blue Cross contract really is.”

SEANC members are more than ready to see SHP reform and they are all too aware of how critical it is for both the state and taxpayers. In a Jan. 6 discussion about skyrocketing health care costs on the SEANC Facebook page, Department of Correction employee and District 17 member Sager Furr rightly pointed out, “I found health care for a family of four for only $210 per month – and guess what, it’s Blue Cross and Blue Shield but through a private insurance company!

This shows that Blue Cross is getting rich off the backs of state employees, and the leaders of this state have allowed it.” If Furr elected coverage from the SHP for his family, the monthly cost for a Standard 80/20 plan would be a staggering $580.44.

YOU may qualify for FREE tax preparation through VITA...

Contact your local SECU branch or go to www.ncsecu.org for details.

THE

cedgar@seanc.org

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Toni Davis, Editor-In-Chief Cary Edgar, Managing Editor Amber Ernst, Associate Editor Daniel Pate, Writer State Employees Association of North Carolina

SEANC Going Green

P.O. Drawer 27727 • Raleigh, NC 27611 1621 Midtown Place • Raleigh, NC 27609 Telephone 919-833-6436, 800-222-2758 www.seanc.org

In order to save SEANC members’ money on paper and help the environment, SEANC will now send the Legislative Update in electronic format only. Any 2011 convention delegate who would like to continue receiving the printed version of the Legislative Update must contact Tony Booe at tbooe@seanc.org or by calling 800-222-2758. Please note that The Short Report and The Reporter will continue to be mailed to all members.

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THE REPORTER MARCH 2011

Advertising Policy SEANC accepts advertising material from companies and persons seeking to communicate with SEANC members. Acceptance of this advertising does not indicate SEANC approval or endorsement of any representation that the message, product or service is as represented by the advertiser. SEANC accepts no responsibility and shall not be liable for any use of or reliance on any such information, product or service. SEANC is a private entity and is under no obligation to carry advertisements of any nature, political or otherwise, that may be viewed as contrary to the interests of the association and its membership.

public policy

Passing the

PHOTO BY Amber Ernst

Retirement Buck

By Cary Edgar On Jan. 28, the board of trustees of the Teachers’ and State Employees’ Retirement System (TSERS) met to discuss the future of retirement security for North Carolina’s state employees.

When faced with the choice to preserve current retirement benefits, SEANC spoke up in strong support of that system. Unfortunately, the TSERS board did not. Neither Treasurer Janet Cowell nor the board took a position to protect the current defined benefit plan. The board’s failure to take a vote on offering new employees a choice between the current defined benefit system and a defined contribution plan opens the door to phasing out the current retirement system.

This inaction means that the General Assembly will now be in a position to decide the retirement security for current and retired state employees, without the input of the TSERS board.

Senate President Pro Tem Phil Berger said recently, “I think you will see some time during this session discussion, if not action, on that issue and see if there is a way to move to a defined contribution [401(k)] plan.”

Big Plans, Big Differences A defined benefit plan, also known as a pension, is a savings system that guarantees a specified monthly payment to retirees. Defined benefit plans create a stable source of financial security for retirees. The alternative is a defined contribution plan, often in the form of a 401(k). The overall value of a defined contribution plan depends on how the financial markets are faring and we all know that has been a rocky road over the past several years.

Act Now! What can SEANC members do now?

Visit www.seanc.org and sign up to participate in a SEANC Lobby Day or Hometown Rally! Can’t make Lobby Day? Call or visit your legislators and tell them that a defined benefit retirement plan is an important part of your financial security. cedgar@seanc.org

SEANC Executive Director Dana Cope speaks to the Retirement Systems Board of Trustees, urging them to preserve retirement security.

SEANC Defends Retirement Security The following is an excerpt of remarks made by SEANC Executive Director Dana Cope to the Retirement Systems Board of Trustees on Jan. 28.

North Carolina’s citizens expect and deserve a well-trained, qualified workforce. This requires three things: a fair wage, a good health care plan and a consistent defined benefit plan.

private sector. North Carolina needs a defined benefit in order to attract and retain the type of employee this state needs to provide the services our citizens have come to expect.

Today, the Teachers’ and State Employees’ Retirement System (TSERS) has a funding issue and the bottom line is if the General Assembly had approved a contribution rate equal to that of the employees’ contribution during this period, we would not be having this discussion today.

With the volatility in the stock market that occurred during the last decade, many states and private sector employers have moved back to defined benefit plans for their employees.

Research shows that employers who switched back to a defined benefit plan did so for two reasons: it provides greater financial stability for employees after retirement, and it is less costly to administer. This is supported by the findings of the commission – that defined contribution plans provide very little savings in either the short term or long term. Common sense dictates that if a defined contribution and a defined benefit plan are offered for new employees, administration costs will actually increase. For these reasons, I would ask you to vote “no” on this proposal.

The bottom line is that the state has put very little into the retirement plan for its employees – an average of 2.29 percent in the last decade, far less than the 6 percent that employees pay to fund their own retirements. The employees are the ones paying the bill for their own retirement system.

Individual employees are the only consistent contributors to the state retirement system, while the state contribution has been nonexistent or severely lagging. State employees contributed to the retirement system when their wages were frozen, their co-workers jobs cut and their workload increased. In good times and bad, state employees continued to fund the system when the state did not see it as a priority.

We applaud your recommendation in October to request funding for the Annual Required Contribution (ARC) that will increase the employer contribution rate to 7.94 percent, but feel that it does not go far enough. SEANC proposes an additional $178 million to the ARC recommendation to cover the General Assembly’s failure to fund the system. Failure to provide adequate funding caused the very problems we now face and if not addressed, these problems will spiral out of control.

We also closely followed the deliberations of the Future of Retirement Study Commission. We strongly disagree with the recommendations of the commission and believe that if enacted, would hurt recruitment of new employees and increase the state’s turnover costs that are already a staggering $325 million per year. Salaries of state employees lag behind those in comparable positions of the

In the 1970s the TSERS Board of Trustees and the General Assembly adopted the 30-year, regardless-of-age retirement benefit. SEANC strongly supports the retention of the 30-year retirement provision with no minimum retirement age. Changing this will make it more difficult to recruit correctional officers, nurses, teachers and hazardous duty professions across state government – just to name a few.

On behalf of active and retired state employees, I implore this board to vote “YES” for full funding of the retirement system, including the $178 million deficit that the General Assembly created last year, “YES” to maintaining the current retirement system and “YES” to allowing the state’s hard working employees to retire after 30 years of service, with dignity and respect.

Today you will make a critical decision – either harm the state from being able to hire, train and retain a quality workforce, or make the state an attractive and reasonable place for North Carolina’s best and brightest to come and work.

Carefully consider the employees who have dedicated a lifetime of public service in your communities as you make your votes.

THE REPORTER MARCH 2011

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public policy

Quotes to Note “You can’t just downsize the state and say, ‘OK, this is going to work. Cut 25 to 30 percent of state workers, and this will fix it.’ That’s not going to fix it.”

“It will send a message to those politicians that have taken us for granted, we’re tired of them treating us like a giant ATM but never caring about our issues.”

SEANC President Charles Johnson on why state budgets and efficiencies must be developed before layoffs are considered, in a Dec. 8, 2010 WRAL-TV story “Laying off state workers not easy budget fix.”

SEANC Executive Director Dana Cope on why SEANC chose not to endorse or contribute to political candidates during the last election, in an Oct. 31, 2010 Associated Press article “N.C. employees stay mostly on the election sidelines.”

“I haven’t seen anything in other states where it’s saved them any money. We don’t serve a stockholder. We serve the citizens of North Carolina.”

“We do feel like we’ve been cut to the bone and asked to do more with less.”

SEANC District 38 member and state IT Support Specialist Lynn McGarrah on the inevitability of failure if North Carolina’s information technology services are privatized, in a Dec. 10, 2010 WRAL-TV story “Perdue’s cost-cutting plan raises concerns.”

“We’re not just the state employee – we’re your citizens and we’re the voters and we’re the taxpayers.”

SEANC District 39 member and Accounts Manager for the N.C. State University Cashier’s Office Mary O’Neill on the need for state employees to be part of the budget conversation, in a Jan. 25, 2011 WRAL-TV story “State workers worry about budget cuts.”

“It’s just another thing that our children will have to suffer because we didn’t plan the right way.”

SEANC District 22 member and Department of Health and Human Services Dental Hygienist Bonnie Johnson about the way that North Carolina citizens and their families will suffer if lawmakers cut essential public services, in a Jan. 30, 2011 News & Observer article “Thousands of state jobs might be cut to balance budget.”

STATEWIDE SALES AND SERVICE Fran Albritton, LUTCF Locust, NC 704-485-8062

Chris Harris Greenville, NC 252-531-1218

Jeff Tate, LUTCF Henderson, NC 252-438-3334

Ty Cobb, CFP Angier, NC 919-639-2300

John Hill New Bern, NC 252-633-1871

Will Walters Fayetteville, NC 910-483-6210

Rob Jernigan Fayetteville, NC 910-483-6210

Scott Kittrell Sanford, NC 919-303-5976

Ron Jackson Raleigh, NC 919-781-6716

Mark Younts Salisbury, NC 704-637-9554

SEANC Communications/Public Relations Director Toni Davis, in an Oct. 6, 2010 ABC 11 story “Major government shakeup by Governor Perdue?”

“We’re going to call out any lawmaker who makes poor judgments.”

SEANC Member Strength Director Kevin LeCount, in an Oct. 18, 2010 Greensboro News & Record article “Rep. Holliman fights to save Davidson seat.”

“We need to see a lot better return of investment than we’re getting. (Higher-risk investments) may be one of the best avenues to get to the point where you get more investment returns, but it’s unsafe unless you have a governance change.”

SEANC Legislative Affairs Director Ardis Watkins on why investment decisions for the state retirement system should be handled by a board of directors and not solely by the state treasurer, in a Nov. 8, 2010 WRAL-TV story “N.C. looking at riskier pension investments.”

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Visit www.SEANC.PurchasingPower.com or call 800-903-0703 Group Code: SNC2191

PROTECTIVE LIFE

NC State Employees Service Office 8364 Six Forks Road, Suite 200 Raleigh, NC 27615 Toll Free 800-334-1217 Local 919-844-1777 www.ncbenefits.com

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THE REPORTER MARCH 2011

public policy

State Employees Association of North Carolina, Inc.

The Pitfalls of Outsourcing IT The following op-ed was published in the News & Observer on Thursday, Feb. 3.

At that time, the estimated budget deficit was $3.7 billion.

Dear Editor, When a state has a $3.7 billion budget deficit, every politician is a surgeon looking to make deep cuts. One of the cuts recently suggested by Gov. Bev Perdue would come from privatizing the state’s information technology services. But before state IT services go under the knife, North Carolina taxpayers should get a second opinion.

Other states have undertaken this exploratory surgery with a long list of failures and cost overruns to show for it.

IT privatization in Texas led to a loss of taxpayer information due to “chronic failures” in data backup and recovery, security, disaster recovery, systems monitoring and management, and staffing and service levels. This was reported by Texas’ chief information officer in a seven-page letter last July to IT contractor IBM, detailing the failures of the 2006 privatization contract. That contract is now being rebid.

Texas taxpayers could not get basic public services, such as car registration renewals, unemployment checks and Medicaid benefits. IBM, on the other hand, collected on the $863 million contract for services promised but not delivered. The clear winner? IBM. In Virginia, problems with a $2.4 billion IT privatization contract with Northrop Grumman caused massive computer meltdowns in state agencies. In August 2010, 26 state agencies lost web services for more than a week, including the state tax agency, DMV and Board of Elections. Too bad for thousands of citizens who intended to pay taxes, register to vote or have their licenses processed that week.

These failures caused costly legislative audits, service outages, project delays and performance problems.

In order to fix the problems, Northrop Grumman was happy to add to Virginia’s running tab – to the tune of an additional $152 million. Unfortunately, the state’s chief information officer was later fired for standing up on behalf of taxpayers and refusing to pay the bill.

Indiana Family and Social Services Administration’s 10-year, $1.6 billion privatization contract with IBM has gone so foul that both parties decided to sue each other last May over the failure. The deal was to have overhauled Indiana’s social services system. Instead, not only does Indiana lack a viable computer system, it is also paying more than $5.25 million in legal fees to sue IBM. Whose pocket will this come out of? What do taxpayers have for this outsourcing deal? A huge bill with no new services.

It’s also no surprise to me that IT privatization deals have failed to achieve the budget savings that states were seeking. IT privatization in these states also failed to stimulate the economy. These exercises have put U.S. employees out of work and added local citizens to unemployment lines.

The cherry on top? Such vulnerability in technological control puts taxpayers’ privacy and financial security in harm’s way. Private companies are concerned with profits, not people. Private contractors answer to Wall Street and the bottom line. Contract companies outsource their IT work overseas (60 percent of IBM’s IT services are in India) to countries not subject to the U.S. laws that govern and safeguard your privacy. This includes your tax information with the Department of Revenue and medical information with the Department of Health and Human Services. All of this shows that IT privatization could also be a clear violation of federal regulations.

The contrast is clear. Public employees are motivated to provide quality public services to taxpayers. Citizens are our stockholders. When it snows, we come to work. When you call us, we answer the phone. When there is a problem, we fix it. And when we work with a citizen’s personal information, we guard and protect it as required by law. We serve the citizens of North Carolina because we stand by your side as fellow citizens of North Carolina.

Before Gov. Perdue and North Carolina’s legislators consider cutting IT services under the guise of saving money and selling North Carolinians’ private information to lowest bidder, it’s time for a second opinion.

Lynn McGarrah

Save the Date for Golf

The Don Jones Memorial Golf Tournament, which benefits the SEANC Scholarship Foundation, will be held at a new time this year. Mark your calendars to join fellow members for the event Sept. 24-25 in Southern Pines.

If you have questions, please contact Renee Vaughan at the SEANC Central Office at 800-222-2758 or rvaughan@seanc.org.

Sept. 24-25

SEANC District 38 Member

Technology Support Specialist Office of Information Technology Services Raleigh, N.C.

Keep Your Insurance Going Have you had a recent change in your personal or professional life?

What about an address change?

Can We Come For a Visit?

Would your work site or agency benefit from having a special update and discussion about what’s going on in the General Assembly? Do you need someone to come and speak with staff about special SEANC projects or initiatives?

Are your co-workers in need of more information about insurance, retiree benefits and scholarship programs? Contact SEANC today to invite a member action coordinator to visit.

You can arrange for this by reaching out to Member Action Director Lynn Cote at 800-222-2758 or lcote@seanc.org.

If you are a SEANC insurance customer, please remember to notify the SEANC Central Office in the event of significant changes. Your insurance policies can be affected by life events such as marriage, divorce and having children, and professional events such as job changes or taking leave without pay. Avoid a potential lapse in coverage by keeping the SEANC Insurance Department informed of your status.

Contact an insurance specialist today at

800-222-2758.

We made a mistake! The February Short Report front page article incorrectly identified Phil Berger as incoming Majority Leader of the N.C. Senate. Berger is the President Pro Tem of the Senate. We apologize for this error.

THE REPORTER MARCH 2011

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Opening Days

PHOTO BY Amber Ernst

PHOTO BY Daniel Pate

On Jan. 27, as the work begins in the 2011-2012 N.C. General Assembly, Legislative Affairs Director Ardis Watkins, left, congratulates Sen. Phil Berger on his election as President Pro Tem of the Senate.

PHOTO BY Cary Edgar

PHOTO BY Toni Davis

Sen. Tom Apodaca, chairman of the Senate Rules Committee, left, congratulates SEANC President Charles Johnson on his leadership for state employees.

SEANC Lobbyist Chuck Stone, right, is shown with sixthterm Rep. Jeff Barnhart, co-chairman of the House Appropriations Committee.

SEANC Lobbyist Suzanne Beasley, left, visits with SEANC District 38 member Sen. Doug Berger before the opening bell is rung to start the 2011-2012 legislative session.

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THE REPORTER MARCH 2011

PHOTO BY Daniel Pate

SEANC Executive Director Dana Cope, right, speaks with Rep. Mitch Gillespie, co-chairman of the House Appropriations Committee.

2011-2012 N.C. General Assembly

PHOTO BY Tony Booe

PHOTO BY Cary Edgar

SEANC Legislative Affairs Director Ardis Watkins, center, and District 43 member Todd Levey, right, talk about IT security with Appropriations Committee member Sen. Bob Rucho, left.

PHOTO BY Amber Ernst

SEANC Lobbyist Chuck Stone, right, visits with former Charlotte mayor Pat McCrory. Mayor McCrory was a special guest of the General Assembly on opening day.

PHOTO BY daniel pate

PHOTO BY Toni Davis

SEANC President Charles Johnson, right, congratulates SEANC District 17 member Rep. Pat Hurley on her re-election to a third term in the N.C. House of Representatives.

Co-Chairman of the Senate Appropriations/Base Budget Committee Sen. Richard Stevens, left, catches up with SEANC Executive Director Dana Cope in the hallway before heading into session.

Members of the SEANC Veterans Council visit with legislators at the General Assembly. Pictured, left to right, are District 62 Chairman Lewis Sasser, District 17 member Dan Efird, District 2 member Jo Ann Hamilton, District 44 member John Paz, Sen. Bob Atwater, House Appropriations Committee members Rep. Grier Martin and Rep. Ric Killian, Western Regional Representative to the Executive Committee Dodie Collins and District 3 member Vicky Greene.

THE REPORTER MARCH 2011

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columns

President’s Message

Executive Director’s Desk

by Charles Johnson

by Dana Cope

Realities vs. Rumors: The State Budget and the State Health Plan I want to take this opportunity to express to you the importance of communication – not just about what is going on in SEANC, but also about realities versus rumors. When we communicate with each other, potential SEANC members and the general public, it is important that we understand both rumors and realities so that we can speak knowledgeably with those who ask questions.

One of the biggest rumors I keep hearing is that the State Health Plan (SHP) is unsustainable. It is such an overused word these days – unsustainable.

Why is it thought to be unsustainable? What are the rumors behind this belief of lack of sustainability?

What are the realities? I’ve been listening, and here Johnson are a few of the rumors that I have heard as well as the facts that negate them.

Rumor One: State employees have a “Cadillac” plan that is completely free.

Each and every one of us knows this is a myth. The average state employee pays nearly 23 percent of their annual income toward the premium and deductible for family health care coverage. This does not include co-pays and the 20 percent not covered as part of the Standard 80/20 plan. The national average co-pay for a doctor visit is $20. State employees pay $25. This is not a “Cadillac” plan.

Rumor Two: The SHP is one of the central reasons why North Carolina has such a large budget deficit. This is simply not true. There are two leading factors to this year’s budget shortfall. First, the state needs to replace $1.6 billion in federal stimulus funds that partially supported the budget last year. Second, the state will lose $1.1 billion if the N.C. General Assembly allows a 1 percent temporary sales tax to expire. Let us also not forget that the SHP is administered by Blue Cross and Blue Shield of North Carolina’s sweetheart, no-bid, cost-plus contract.

They can charge the state for anything – including their CEO, food, travel and sports sponsorships. Yet in these hard economic times with the state facing a $2.4 billion budget shortfall, Blue Cross has not been asked to make any concessions.

This is a contract that needs to be opened; no state contract should be cost-plus – especially when the “plus” gets defined by an outside corporation.

Rumor Three: As a group, state employees are less healthy than the other populations of North Carolina, thus more expensive to insure. Really? If state employees are such an unhealthy group, why does research say that it costs the state less to insure us than it costs the average large business to insure its employees? North Carolina state employees are at least 10 percent less expensive to insure than the average employee in a business in the South.

Access to the facts that dispute these rumors is easy – you can find it in SEANC publications, on the SEANC website and on the SHP website. It is up to each and every one of us to search out and promote the truth instead of tolerating rumors. When you get the facts, it is important to share them with co-workers and fellow SEANC members. It is your responsibility to become more engaged.

It is going to take more than the efforts of your elected state and district officers to keep and enhance our benefits – it is going to take all of us. cjohnson@seanc.org

Do you want the latest updates about how SEANC is working for you in the General Assembly?

Sign up to receive e-mail alerts at www.seanc.org/email

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THE REPORTER MARCH 2011

State Pensions Not to Blame for This Crisis The following was published in the Fayetteville Observer and the Morganton News Herald in response to an editorial criticizing state workers as a source of North Carolina’s budget woes.

Calling any faction of North Carolina’s state budget “too rich” shows profound disrespect to our collective economic problem, both within the state and in the nation as a whole. The actual richness in state and federal governments has been, unfortunately, corporate welfare, loosening regulations and the continued creation of banks and insurance companies that politicians in D.C. and Raleigh describe as “too big to fail.”

Your inadequate editorial tried but failed to stand on a tired notion that public employees are to blame for our state’s economic crisis. Or in the least, it tried to assert that one swift cut to state worker benefits can pull us out of the crisis. Even when printed on the relative safety of the opinion Cope page, this piece was a poor excuse for journalism.

Declaring the benefits of overworked and underpaid state workers “lavish” is a slap in the face to each Department of Transportation laborer who thanklessly clears snow at 5 a.m. so that you can enjoy a safe commute, the mental health care aides who look after our most vulnerable citizens and every correctional officer who knows that it’s all in a day’s work to stand face-to-face with convicted murderers and rapists.

Your assertion that hard working state employees and retirees are somehow to blame for skyrocketing health care costs is both careless and malicious. An enormous target of inquiry and criticism should instead be Blue Cross and Blue Shield of North Carolina and their no-bid sweetheart contract for the State Health Plan. Our organization has taken repeated action to try to open this contract for bid.

As it is currently written, the cost-plus contract allows Blue Cross to charge the taxpayers of this state for everything from CEO Brad Wilson’s bonus to professional sports sponsorships – costs that have nothing to do with providing health care to our state’s workforce and everything to do with cheating taxpayers.

This fraud of an agreement represents the lion’s share of blame for a system that needs continued and unanticipated financial support to remain afloat. An independent study commissioned by the N.C. General Assembly last year revealed that we have the lowest cost per state employee or family member insured of all states in the report. Revoking Blue Cross’ existing contract and opening the process for a new bid will save taxpayers millions of dollars while simultaneously reigning in health care costs and preserving the quality public services that our state’s workers so tirelessly provide.

Your allegations of a retirement system that is “killing” the state budget is not only misguided, it is plain incorrect. The Teachers’ and State Employees’ Retirement System is funded by three sources: employee contributions (6 percent of the employee’s salary), investment returns and employer contributions.

Individual employees are the greatest and only consistent contributors to the state pension system, while the state contribution has been either nonexistent or severely lagging. In the last decade, the average state contribution was 2.29 percent, far less than the 6 percent that an employee pays to fund their own pension.

The irony in this debate is that the pension system is in trouble not because state funds were used to contribute to the pension, but because the state of North Carolina didn’t contribute funds during time of economic prosperity. This negates your argument that slashing the modest pensions promised to our state’s workforce is a magical panacea for the budget gap.

Make no mistake that the budget will be cut. The unique opportunity in front of lawmakers is where those cuts should come from. We stand ready to work with the N.C. General Assembly to make that happen. dcope@seanc.org

columns

Counselor’s Comments

by Tom Harris

SEANC Chief of Staff/General Counsel

Call to the General Assembly to Fix Bad Terms of Blue Cross’ Contract This year, the Republican-led N.C. General Assembly should do what Democratic leaders failed to do the last two years: fix the bad terms of Blue Cross and Blue Shield of North Carolina’s contract to administer the State Health Plan (SHP). Those bad terms are costing the SHP, its members and North Carolina taxpayers untold sums that even in the best of times would be a shameless waste of government funds. Of course, especially in these times of revenue shortfalls, the entire situation is totally unacceptable.

A Bad Contract. In 2006, without using a competitive bid process, the state entered into a contract with Blue Cross to administer the SHP. In a 2009 performance audit, State Auditor Beth Harris Wood disclosed that a major portion of the SHP’s overspending resulted from bad terms in the contract. As specified in those bad terms, the SHP must reimburse Blue Cross its costs (plus pay a profit), but it does not specify which costs are allowable or how Blue Cross is to measure those costs. Moreover, as a cost-plus agreement, the contract provides Blue Cross no incentive to control their costs, which conveniently results in increased profits.

The contract even has a special provision preventing the SHP from ever learning what specific costs Blue Cross is charging. As a result, both taxpayers and SHP members share the burden of administrative costs defined solely by Blue Cross.

Terminate or Renegotiate. One way to get the SHP out of this bad contract would be to either terminate it and negotiate a different agreement, or go through a new bidding process to replace it. Under the current contract, the SHP may terminate the agreement for two reasons: 1) if Blue Cross commits a material breach that is not cured within 60 days of written notice, or 2) if Blue Cross commits fraud. One way a material breach can occur is if Blue Cross violates a representation or warranty contained in the contract. For example, one of the warranties made by Blue Cross is a “performance guarantee” that its payment error rate will be no more than 2 percent.

Changing the Terms. Another way to get rid of the bad terms is for both parties to renegotiate the contract and replace the terms with conditions that are fairer to the SHP, its members and taxpayers. The contract contains a process for the SHP to propose changes at any time, forcing Blue Cross back to the table for negotiation.

DAVID G. SCHILLER KATHRYN H. SCHILLER DARA DAMERY

__________________________________________________

MARVIN SCHILLER, Of Counsel CAROL M. SCHILLER (1940-2009)

PROFESSIONAL PARK AT PLEASANT VALLEY 5540 MUNFORD ROAD • SUITE 101 RALEIGH, NORTH CAROLINA 27612 www.schillerfirm.com (919) 789-4677

Class Actions

Retirement Benefits

Employment Law

Social Security Benefits

Family Law

Wills & Estates

Personal Injury

Workers’ Compensation

Marvin Schiller was lead class counsel in Faulkenbury v.

Teachers’ & State Employees’ Ret. Sys. (1997) (recovering disability retirement benefits for several thousand State employees, teachers, law enforcement officers, other public employees, and their families) and Simpson v. Local Govt. Ret. Sys. (1987) (public employees’ benefits vest after 5 years of public service). He authored the SEANC amicus curiae brief in Bailey v. State (1998) (exempting some public employees from State income tax on their retirement benefits).

Firm members have ably represented hundreds of State employees and teachers for over 35 years in employment, retirement benefit, workers’ compensation, and injury cases.

Firm members established the Carol Masters Schiller Distinguished Scholar of Neurology Chair at the University of North Carolina Medical School at Chapel Hill.

Doug Sutton

Insurance Services Providing quality and affordable insurance to SEANC members for over 30 years.

We appreciate doing business with you!

Require General Assembly Action. The General Assembly must take whatever action is necessary to fix the bad terms of this contract, whether that means terminating the agreement or using its public stature to force a renegotiation.

Certainly, its immense public interest in trimming waste from the state’s beleaguered budget should be sufficient to convince Blue Cross to do the right thing to fix these bad terms.

What SEANC Members Can Do. As members of the SHP, you can help the General Assembly find the grounds and the will to take action. Send SEANC evidence of instances where Blue Cross has made overpayments. If we can show the General Assembly that Blue Cross’ error rate exceeded 2 percent for claims under the SHP, there will be grounds to terminate the contract. In addition, we should all contact our legislators and urge them to change the contract, replace the bad terms and provide a better SHP to members and taxpayers of North Carolina. tharris@seanc.org

Please call us if we can be of service.

919-836-9993 or Toll Free: 1-800-788-7771 dougsutton@dougsuttonins.com

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member action

SEANC Members Up-Close-and-Personal with President Obama

On Dec. 25, 2010, members from District 66 visited pediatric patients at Lenoir Memorial Hospital in Kinston. Each patient was given a box of crayons and a coloring book along with well wishes for a speedy recovery. District 66 also donated over 60 coloring books and crayon sets to be given to future patients.

Pictured with two pediatric unit nurses, left to right, are District 66 member Pam Yelverton and District 66 Chairwoman Lenell Miller. Chairwoman Miller is shown holding future SEANC member, Lawrence, son of District 66 member Selena Knight.

On Nov. 13, 2010, members attended the Durham Branch NAACP 36th Annual Freedom Fund Banquet. The event was co-sponsored by SEANC. Pictured from the left are Carol Luebke, N.C. Rep. Paul Luebke, Piedmont Regional Representative to the Executive Committee Angela Lyght, District 40 member Kamesha Falana, Lori Williams Falana and District 43 Chairwoman Nicole Hunter.

District 43 members also donated a bicycle to Knightdale resident Christopher Reaves on Dec. 22, 2010, as part of an annual Christmas project. Reaves, whose original bicycle was stolen six months previously, was given a coat, gloves and a new bike lock as well.

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Photo contributed by Henry Belada

Photo by Michael A. Judd

On Dec. 21, 2010, members from District 19 took part in a holiday charity event that donated 27 sleeping bags to the Meet Me at the Bridge Ministry in Durham. Pictured, left to right, are District 19 members Shirleta Nelson and Martha Fowler, Larry McGarr, Pastor David Smith and Jimmy Chalmers from the Meet Me at the Bridge Ministry, and Piedmont Regional Representative to the Executive Committee Angela Lyght.

On Dec. 20, 2010, District 41 donated $300 to Kenda’s Wish, a fundraising effort that delivers gift bags to pediatric patients during the holiday season. Pictured is District 41 member Kelly Russell presenting a check to Linda Eckles, founder of Kenda’s Wish. The group’s signature gift bag item is pajamas. The Kenda’s Wish mission is to “bring hope and joy to children, just as they deserve.”

Members from District 5 and 7 joined together on Dec. 2, 2010, to participate in the J. Iverson Riddle Developmental Center Christmas Parade in Morganton.

Pictured, left to right, are Past President Tony Smith, District 5 members Sherry McCracken and Crystal Cole, District 5 Chairwoman Melissa Freeman, Nicholas Freeman, District 7 member Ronnie Fox, District 5 member Johnny Burnett and Western Regional Representative to the Executive Committee Henry Belada.

Photo contributed by Lenell Miller

Photo contributed by Angela Lyght

aslyght@sprint.blackberry.net

On Dec. 6, 2010, several SEANC members were invited to hear President Obama speak at Forsyth Technical Community College. Pictured, left to right, are SEANC Member Strength Organizer Resha Fortson, Piedmont Regional Representative to the Executive Committee Angela Lyght, District 42 member Sarah McDonald, District 19 member Inetha Cousin and District 42 Chairwoman Betty Jones. McDonald told Fox News 8 that “The president today was awesome. His vision was in line with our vision of trying to retain work, employees and employers.”

Photo by Laura DeGarmo

I could hardly sleep the night before. I was so excited! Doors opened at 10 a.m. but we arrived early at Forsyth Technical Community College with eager anticipation of hearing remarks from President Barack Obama. After waiting for at least an hour, our president finally entered the room. Everyone was on their feet and cameras were flashing all over the gym. Prior to sharing his remarks, the president visited a few biotechnology classes at Forsyth. He expressed that he came to Forsyth and to North Carolina because our state has shown America what the future can look like through building, innovating and educating. The president ended his speech by stating that our country is going to be fine just as long as there are people like the men and women there at Forsyth. I couldn’t agree more.

Photo by Valerie Foushee

By Angela Lyght, Piedmont Regional Representative to the Executive Committee

member action

Photo by Wanda Simmons

District 67 member Cleve Woolard received the prestigious Order of the Long Leaf Pine for over 40 years of fighting fires. Pictured at left is Ronnie Weems, president of the Craven County Fireman’s Association, shaking hands with Woolard, right. The presentation took place at the association’s annual ball on Nov. 6, 2010, at the New Bern Shrine Club.

Rosa Brodie, SEANC District 57 member and secretary of the Nash Health Care Board of Commissioners, was awarded the Order of the Long Leaf Pine at a Nash Health Care Board of Commissioners meeting on Dec. 2, 2010. The award was presented to Brodie, left, by SEANC District 56 member N.C. Rep. Angela Bryant, right, for her 30 years of service to the state of North Carolina.

Photo by Vickie Baker

Photo courtesy of the Rocky Mount Telegram

Photo Contributed by Latina Shelley

Photo by Joan Buck

Members from District 39 celebrated the holiday season by delivering stuffed animals to hospitals throughout the Triangle on Dec. 21-22, 2010. Pictured with a Rex Hospital nurse, left to right, are District 39 Chairman Art Anthony, Briana McManus and District 39 members Sarah McManus and Kathleen Snyder. This was the third year the drive was held; over 300 stuffed animals were collected.

On Nov. 18, 2010, Sgt. Daniel Johnson of the National Guard (seated) and his wife, Kathy Johnson, presented District 7 members with a flag that was flown over Afghanistan.

The Johnsons also presented a plaque to the district in appreciation for sending boxes of supplies to Johnson’s unit. Pictured with the Johnsons, left to right, are Western Regional Representative to the Executive Committee Henry Belada, District 7 member Ronnie Fox, Marlin Ward and District 7 members Sandra Bristol, Gary Harbison, Sheila Roberts, Debbie Chadwick, Laura Horton and Scott McMahan.

Photo Contributed by Lynn Tuthill

Photo By Vicki Lane

District 46 members’ holiday charity work included volunteering for the Meals on Wheels of Wake County on Nov. 29-30, 2010, and donating $200 to the Capital City Clause Toy Drive. Pictured, left to right, are District 46 Chairwoman Sharon Dobson and District 46 members Beverly Wiggs, Chris Allen, Debra Mahmoud, Dewey Hamilton and Linda Dean.

District 64 pitched in with the Piney Grove Free Will Baptist Church on Dec. 18, 2010, to donate items to needy families for the holiday season. The items included food, clothing, shoes and electronics. Pictured in the right back row is District 64 member Latina Shelley with one of the families that received donated items.

On Dec. 2, 2010, a group of SEANC members made more than 20 miniature Christmas trees out of wire, lights and garland for nursing home residents in Greenville. They also donated gifts to two teenage children from the Greenville Community Shelter. Pictured, left to right, are District 65 member Lynn Tuthill, Danielle Abeyounis, District 64 member Sharon Sharpe, District 65 members Doris Wrighten and Martina Christie, Daniel McClure, and District 65 members Linda Nelson, Kisha Johnson and Evelyn Hinnant. The members’ benevolent acts were highlighted in an SEIU blog on Dec. 22, 2010 that spotlighted member charity events throughout the country.

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