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Dan Liljenquist: Negative impact: the Affordable Care Act, pensions and hourly workers

Published: Thursday, Feb. 27 2014 5:24 p.m. MST

Between unprecedented increases in required pension contributions due to the 2008/2009 market crash and the soon-to-be-enforced, expensive Obamacare mandates, school district and other public employer budgets are stressed like never before.

Rich Schultz, Associated Press

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On June 13,2013, a friend of mine who works as a high school security guard in the Granite School District, a 15-year veteran paid at an hourly rate of $12, received a letter from Granite’s human resources department announcing that “in light of new rules for the Utah Retirement System and the Affordable Care Act” all hourly employees would immediately and without exception be capped at 29.5 hours per week. My friend, who was hitting regular overtime on top of his 40 hours but still living paycheck to paycheck, lost over $800 per month in income without warning, nearly lost his home, and now works a second job to make ends meet. When I met with my friend last week, he handed me a copy of the letter and asked me, somewhat incredulously, how the public employee retirement system and the Affordable Care Act could cause so much damage to district finances to necessitate such cuts — especially when he reads that the economy is growing and Governor Herbert is proposing a 2.5 percent increase in per pupil funding.

For my friend, and the thousands of other hourly public employees who have found, or will find themselves with their hours cut to just below 30 per week, here’s the answer — between unprecedented increases in required pension contributions due to the 2008/2009 market crash and the soon-to-be-enforced, unbelievably expensive Obamacare mandates for large employers, school district and other public employer budgets are stressed like never before. There is simply not enough money to go around.

By all measures, the 2008/2009 market crash has had a devastating impact on Utah’s public finances. The pension fund lost over 22 percent of its value, opening up a $6.5 billion funding gap that requires hundreds of millions of dollars of additional pension contributions each year. By the end of 2015, required pension contributions will have increased by 75 percent since 2009 and are projected to remain at historically high levels for the next 25 years.

While the Utah Legislature took aggressive action in 2010 to fix the pension system going forward, the unprecedented increases in required contributions have been difficult to absorb. Cut backs on hours and overtime are a direct result of higher pension costs.

The Affordable Care Act is also impacting public employee hours. Under Obamacare, employees are classified as full-time if they work 30 or more hours per week, and certain large employers will soon be mandated to provide “affordable” health insurance for their full-time employees or face stiff penalties. A health insurance policy is only deemed “affordable” if it costs the employee less than 9.5 percent of the employee’s annual household income, and the employer is required to cover all healthcare costs above that threshold. For my friend who made roughly $13,500 in income and who paid around $2,600 towards his healthcare premiums in 2013 (or 19.25 percent of his total income), the Granite School District would be required, once the employer mandate kicks in, to subsidize his premiums by an additional $1,350 were he deemed to be a full-time employee. Multiply this additional expense over hundred and hundreds of similar situated employees, and it is easy to understand why Granite School District made the decision now to limit hourly workers to 29.5 hours per week.

I feel badly for my friend and the thousands of others like him who have been caught in the churn of the massive economic forces swirling all around us. His is just one more example of how some policies can negatively impact the lives and livelihoods of those they were supposed to have helped. It is sad to witness.

Dan Liljenquist is a former state senator and former U.S. Senate candidate.

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