Government departments will have to find more than $200 million a year to fund employer contributions for retirement schemes following changes in today's budget.
The State Services Commission (SSC) pays the employer contributions for public service workers' KiwiSaver and the State Sector Retirement schemes, but from July next year the contributions will be paid by individual departments.
For the 2011/12 year the SSC has $95m allocated for the KiwiSaver scheme and $105m for the state sector scheme -- money government departments will have to scrape together from their existing budgets in the future.
Finance Minister Bill English said $650m would be saved over three years from the change, with the money to be put towards improving frontline public services.
"The Government is requiring state service agencies to fund their own employer contributions to workplace savings schemes -- putting them on the same footing as other employers and improving the incentives for them to fully assess the cost of employment decisions."
A further $330m would also be saved by cutting back core government administration from 31 agencies.
"Data collected for 33 government agencies, including many in the core public service, showed they spend about $1.8 billion a year on administrative and support functions," Mr English said.
"This amount of back office spending is simply too high and some of it could be better spent on improving frontline services in areas like health, education, and law and order, or repaying Government debt.
"We have given agencies a number of tools to help them find savings while maintaining high-quality frontline public services, including a recent Treasury report benchmarking the cost of agencies' back office functions."
But Public Service Association national secretary Brenda Pilott told NZPA the idea money could be found by squeezing back offices was "fiction".
"There's been two years of squeezing the so-called back office, and we've seen 2000 job cuts during that time and so the idea that we're going to find another $330m without there being service cuts, I simply don't believe," she said.
"They're certainly not taking a clear leadership role where they say 'we want to stop doing these things'... they're simply telling departments to squeeze money out of services that we know, in many cases, are struggling to maintain their levels of service already."
Ms Pilott said the change to the retirement schemes was effectively a massive cut to each department.
"It's a big amount of money they're going to have to find from cuts elsewhere."
