Emphasizing threatened state funding cuts only are preliminary, the Public Employee Benefits Program board agreed Thursday to prepare a preliminary budget plan maintaining existing benefits.
The budget would thus have plan participants cover any shortfall.
Gov. Brian Sandoval’s staff has advised all state agencies to prepare for the possibility of up to 5 percent reductions to current funding when they build budgets for the 2018-2019 budget cycle. They told a meeting of agency officials if revenues don’t improve, those reductions may be absolutely necessary to balance the state budget.
The PEBP board was told Thursday that includes the benefits program that provides health care coverage for more than 20,000 state workers and retirees.
Executive Director Damon Haycock said a 5 percent cut in state funding comes to a total of $25 million during the biennium.
“This is far from a sure thing,” said board Chairman Leo Drozdoff. “This is a contingency.”
He said this plan would be far easier than designing “a myriad of changes” to the benefits the plan provides.
“In contingency, we should try to do something as easy as possible and as easy to extricate ourselves from as possible,” he said.
Former PEBP Director and now Finance Director Jim Wells agreed with Haycock and Drozdoff saying that approach would be much easier to reverse than plan changes.
“This basically leaves benefits where they are,” he said.
Haycock and Chief Financial Officer Tena Glover also pointed out the potential cutbacks aren’t the only financial issue the board has to deal with as they build the budget. Glover said they typically anticipate medical inflation will be about 10 percent. In addition, with the economy recovering, the state is again filling long vacant positions, increasing PEBP’s total enrollment and, therefore, premium costs. She said the potential change in the program’s HMO vendor also could increase costs.
Finally, she pointed out that some of the benefit enhancements the program has implemented in the past few years are paid for by excess reserves that are going to be exhausted by the end of this budget cycle and not available to continue paying those costs.
The PEBP program is budgeted for a total of $1.46 billion this budget cycle.