OLYMPIA -- The state should cut off automatic increases to some state retirees and keep others from retiring then being rehired for their old jobs, Gov. Chris Gregoire said today.

It should also revamp health insurance programs to find savings from large purchase and reductions in unneeded services, she added.

Gregoire unveiled several proposals Monday afternoon that she said could spell big savings over the next two-year budget cycle and beyond. It's part of a slow roll-out of her fiscal 2011-13 budget, which will continue Tuesday and wrap up with a full budget book Wednesday.

Among the proposals floated Monday were an end to automatic increases to most of the retirees on the state's oldest pension systems, PERS 1 and TRS 1. The increases were passed by the Legislature in 1995 as protection against inflation, but with inflation low, Gregoire is calling for the state to go back to the old system of letting the Legislature vote on any adjustments it sees fit.

The state should also get rid of early retirement incentives for new employees who choose to retire before age 65, she said. And it should make two changes in the retirement systems for employees of the state universities and colleges: cap the state's contribution to those plans at 6 percent, which it does for other state employees, and ban the practice of allowing college employees to retire  then be rehired for their old job, allowing them to collect a pension and a paycheck.

On health care changes, Gregoire wants state medical insurance plans -- which cover some 335,000 public employees, family members and retirees, and some 1.3 million low-income children and families on Medicaid and other programs -- to adopt a generics first policy for prescription drugs, divert more patients from the emergency rooms to clinics for non-emergency cases and monitor patients with histories of high-cost services.

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