Just one provision of dozens impacting cities and towns in the governor’s supplemental budget – an act establishing the co-payment of health care and dental benefits at 25 percent of cost - could save Warwick taxpayers nearly $5 million a year.

“It is one of the single largest ways that could infuse cost savings into the budget,” Leonard Flood, director of school business affairs said Friday.

It won’t happen all this year, if at all.

The teachers’ union is in the midst of an extended contract that saw them take a cut in a pay increase in exchange for another three years of $11-a-week co-payment for health care. That agreement was reached with teachers last fall as a means of balancing the school budget. Now it would appear if the 25 percent co-payment were enacted, teachers would be locked at the $11-a-week co-payment until September of 2011. On the other hand, the Warwick Independent School Employees are still without a contract. They are not paying a co-payment and presumably would be subject to one.

School Committee member Paul Cannistra, who vehemently opposed the contract extension when it was ratified by a 3-2 vote, said the Supplemental Budget proposal is just another reason why the contract is unaffordable. The fact that Warwick teachers will pay just $11 per week while the rest of the state pays 25 percent is not fair to Warwick taxpayers, he said.

“I’m just as unhappy with that contract now as I was the day it was voted on. I knew it was a big mistake then and I know it was a big mistake now,” said Cannistra.

“We could have done a lot of things to make that contract more affordable for our taxpayers and gained management rights.”

If the measure passes, Warwick police, fire and municipal employees whose contracts expire at the end of this June, would be faced with the 25 percent co-payment starting in July. This appears to be the case even should Mayor Scott Avedisian recast the current contracts at this time. Avedisian has been in talks with the unions in an effort to gain concessions so that the city might cope with the elimination of $4.8 million in state aid, which is also part of the governor’s supplemental budget all aimed at plugging a $357 million shortfall in the current fiscal year.

On the city side, personnel director Oscar Shelton projects a savings of another $2 million.

However, the measure applies to only a part of the city’s health care costs. It does not apply to health care coverage for retirees.

According to Peder Schaefer, chief of the division of municipal finance in the Department of Revenue, cities and towns are paying $120 million in health care costs for active employees and another $47 million for retirees (teachers are not included in the numbers). Warwick’s costs total $16.9 million of which retiree benefits total $6.3 million.

“There was a legal discussion as to whether you can do that [set the co-payment for retirees],” he said.

Whether the state can dictate the percentage of co-payment for municipal employees is certain to be contested. Schafer said the state gives municipalities the authority to collective bargaining and therefore can set the provision. The provision applies to all contract agreements executed after Jan. 1 of this year.

“That’s our article, we support it,” said Dan Beardsley, executive director of the Rhode Island League of Cities and Towns. Beardsley said the provision also applied to retirees when drafted “but it was changed at the last minute.”

Beardsley said the co-payment requirement was one of 10 provisions supported by the league and integrated into the governor’s supplemental budget. Other measures would ensure the cities and towns don’t see a decrease in telecommunications tax revenues, require that judgments in suits brought by school districts over funding cannot exceed the maximum levy requirements set by law and that cities and towns be required to pay 80 percent of the salaries on police and firefighters injured on the job. Presently they are paid 100 percent of their salaries, which Beardsley says serves as a disincentive to return to work and leaves the municipality paying overtime so as to meet minimum manning requirements.

Unlike the city that will lose $4.8 million in state funding, schools got a small hit.

The governor’s budget cuts $453,000 in professional development funding from Warwick schools. Flood said the department has spent or committed $150,000 to $200,000 of the amount that it will need to offset within other areas.

Yet, the governor’s budget with its directive to raise the retirement age to 59 and the elimination of pension cost of living adjustments, raises another concern for schools. Those reforms apply to the state pension plan and could trigger a massive exodus as they would apply to retirees leaving the system after April 1. (The governor has indicated that the date is not necessarily hard and fast, although as of Friday it could not be determined if it has been changed.)

“It sent shock ways through the educational system,” said Flood. He projected the pension changes as being capable of saving the system $3.8 million annually.

Rosemary Healey, school director of human resources, said there are 149 employees, most who are teachers and the remaining 10 to 15 administrators, who would be eligible to retire.

Given the fact that teachers across the state would be retiring, Healey said the provision would create a “huge vacuum” of teachers that would be difficult to fill. As the department has a pool of 160 substitute teachers she believes the department would be able to cover most classrooms with the most difficult being math, science and chemistry. She said gaps in staff could be filled by calling back teachers who were laid off last year and re-hiring retirees under the 90-day provision. The provision allows retirees to work the 90 days without losing pension benefits.

Healey said the department is being pro-active and last week started advertising for positions so that it will have a bank of candidates should there be massive retirements.

“It’s going to be a real challenge,” she predicted.