Most citizens understand problem with taxes

Published 12:00 am Thursday, January 15, 2004

Another tax increase referendum has come and gone, and with it another crushing defeat and another vote of “no confidence” in the government’s ability to manage its resources in Alabama.

On January 13th, Shelby County residents voted down a property tax increase by a whopping margin of 73 to 27 percent.

The margin of defeat may have been enhanced by the recent reports of mismanagement and possible corruption disclosed in the audit of the Birmingham City Schools system.

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The Birmingham News reported that auditors found that about $1 million was improperly or illegally spent between October 1, 2001, and September 30, 2002.

In addition, the auditors reported finding falsified payroll records, bookkeeping in disarray, and abuses that go back for years, with evidence that hundreds of millions of dollars were never properly reconciled.

Unfortunately, the financial management problems found by the auditors are not confined to the Birmingham schools.

Other reports of mismanagement, incompetence and flat-out corruption have been found around the state, leading the Shelby County voters and most Alabamians to conclude that government at just about every level needs some serious reform.

Getting serious about eliminating the abuse and misuse of Alabama taxpayers’ money will require reform that goes beyond efforts to eliminate corruption and incompetence, however.

It will require a determined effort to reform some of the state’s most expensive programs.

At the center of any reform effort must be the enormously expensive Public Education Employee Health Insurance Program known as PEEHIP.

PEEHIP is projected to cost Alabama taxpayers more than $700 million this year and the annual costs have been escalating at an alarming rate.

Costs for PEEHIP are projected to increase at such a rapid rate that one state legislator, Scott Beason (R-Gardendale) predicts that in just five years Alabama taxpayers will be spending more money on education employee health benefits than on the state’s General Fund, which includes the revenues designated for highways, public safety and prisons.

There is an effort by Gov. Bob Riley and some conservative state legislators to bring greater accountability in the management of the taxpayers’ money by pushing for reforms to PEEHIP.

Last fall Riley appointed a Commission on Efficiency, Consolidation and Funding to look into every area of state spending including education employee benefits.

The Commission concluded that the rapid increase in the cost of state employee health benefits is a major threat to the state’s General Fund.

In addition, a report released by the Alabama Policy Institute (API) authored by Dr. Cindy Sneed and Dr. John Sneed of Jacksonville State University found that PEEHIP premiums paid by state employees are currently the lowest in the 11-state Southeast region and have not been increased in eleven years.

At the moment, state education employees pay only $2 per month for single coverage and $134 per month for family coverage.

And according to the Retirement System of Alabama’s (RSA) website, the “PEEHIP deductible is one of the lowest around.”

That is not all.

Not only are current employees getting great health insurance for much less than the vast majority of Alabamians pay, but the state also pays the PEEHIP premiums of retirees.

This is a major issue that the state must address to bring solvency to the state’s finances.

Currently, a state employee can retire at any time after working 25 years.

This means that someone who started working in public education right out of college could reasonably retire at age 47 and the state continues pay their PEEHIP premiums until they reach age 65.

Once they reach 65, their Medicare coverage would start and the state’s payment would be reduced.

One recommendation in the API report to make PEEHIP more affordable is increasing the amount of the premium paid by state employees.

The API report suggests setting the employee portion of the premium at a flat percentage of the total premium costs which would protect the state from bearing a disproportionate burden of future cost increases.

Another reform proposal the state could reasonably implement is raising the retirement age to 60 and requiring that, with limited exceptions, early retirees pay half of their health care premiums until they reach age 65.

The Commission on Efficiency, Consolidation and Funding and the conservative state legislators are moving in the right direction in their efforts to make state government more accountable in its use of the taxpayers’ money.

Their recommended reforms are not callous attacks against state employees as some state employee union bosses have described them.

Reasonable reform will still allow Alabama to have a salary and benefit package that will attract quality people to work for the state and to teach in our schools.

But there must be accountability and the state must be able to afford it.

That is the message the voters are sending.