Topeka ? A voluntary state employee retirement program is expected to save Kansas government about $34.5 million over two years, a Brownback administration official said Monday

Administration Secretary Dennis Taylor said 1,027 eligible state employees, whose annual salaries total $42.7 million, decided to participate in the early retirement program. After including the cost of health insurance and other expenses, Taylor said the state will save $8.9 million in the current fiscal year and $25.6 million in fiscal year 2013.

Eligible employees were offered a chance to retire early and receive either a lump-sum payment of $6,500 or up to five years of group health insurance. Taylor said more than 90 percent of those who chose to retire elected to take the health care option until age 65 when they are eligible for the federal Medicare system.

“No offer of retirement was rejected by the state for anybody,” Taylor said.

Some of the positions being vacated will be replaced, Taylor said, which may affect overall savings to the state. He said Gov. Sam Brownback has given guidance to agency officials that an aggregate of 25 percent of the retirements would be replaced.

Taylor said the figure would range between 18 percent and 40 percent for individual agencies.

The largest number of retirements came from the Department of Social and Rehabilitation Services with 344 positions, followed by the Department of Transportation at 152 positions and Kansas State University at 68 positions.

“I think it will be interesting how this unfolds and the impact on the different agencies,” said Rep. Sharon Schwartz, a Washington Republican.

Taylor modeled the program after one he administered while he was a Topeka city official. He said the participation rate was similar to what the city experienced, though he didn’t have a goal in mind for the state in reducing payroll.

Brownback’s administration has been looking for ways to reduce its payroll and overhead costs to drive down state spending. Earlier this year, the governor eliminated some 2,000 vacant positions across state government, some of which had been open for several years. It was part of the overall effort to increase the state’s cash reserves in the current fiscal year.

The cuts in spending and improving state revenue collections have the state in a position to end the 2012 fiscal year on June 30 with more than $315 million in reserves.