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NYS Comptroller

THOMAS P. DiNAPOLI

The Academy for New York State's Local Officials

Multiyear Financial Planning: A Tutorial for Local Government Officials

Module 3: Projecting Expenditures

Employee Benefits

Sensitive to Economic Change: Yes
Predictable: Yes
Controllable: Somewhat (may negotiate contracts)
Large Portion of Expenditures: Yes and growing

Employee benefits costs are affected by various factors, including health care costs and pensions. Like personal services, these are rarely budgeted by department, although department heads will be able to project employment trends that affect these costs.

Recently, health care costs have significantly outpaced inflation, while pension contribution rates have returned to historic norms following the end of the stock market boom. Health care providers and the various State pension systems can help localities estimate these costs.

Collective bargaining agreements also affect benefits. For example, if one bargaining unit settled for lower cost of living increases in exchange for a generous post-retirement health insurance package, your locality's out-year fringe benefit costs will likely be higher, especially if you’re contemplating offering an early retirement package to reduce the workforce to pay for salary increases.

Also, changes in levels of coverage, such as the adoption of a cafeteria-style health benefit plan, can have an effect on employee benefit costs.

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