Public employee retirement benefits shouldn’t burden taxpayers
October 9, 2006
One of the important duties of a governor is to make tough decisions designed to protect the long-term financial stability of a state, and to determine how to provide necessary services to constituents in need of assistance without unduly burdening taxpayers.
As governor, I have been committed to the health and well-being of Nevada. Throughout my administration, we have instituted or expanded several health-related programs that have greatly benefited the people of our state, including Senior Rx, Nevada Check Up and mental-health care, in addition to privatizing the workers’ compensation insurance program. Health care has absolutely been one of the pillars of my administration.
I have also rewarded state employees for their hard work and dedication to the people of Nevada by including cost-of-living increases in my 2001 and 2005 executive budgets.
Nevertheless, it is essential that the next governor and Legislature further examine the long-term financial impact and burden on taxpayers of the escalating cost of providing health benefits to retired state employees. Currently, vested state retirees receive a health-care subsidy every year after they retire, regardless of the increased cost of the subsidy to the state. The estimated liability for retiree health benefits presently ranges between $1.62 billion and $4.1 billion for existing and former state employees, depending on whether the state chooses to pre-fund the liability or continue to pay-as-we-go.
With the rate of medical inflation escalating at a double-digit pace, the state’s liability, and ultimately that of Nevada taxpayers, will no doubt continue to grow alarmingly.
During the 2005 Legislative session, I presented a plan to eliminate payment of state employee retirement health premiums and subsidies for new hires. The plan would have saved the state approximately $500 million over the next 30 years. This plan was NOT retroactive; it only would have affected new employees entering the Public Employees’ Benefits Program. Most future employees would likely be protected by Medicare; could still take advantage of the state’s deferred-compensation plan to create their own retirement savings account; and would be able to participate in the state’s group health insurance plan, only at its actual cost, rather than through state subsidization.
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The time has come for a comprehensive review of the state’s retiree health benefit program for future state employees, and to assess the fairness of continuing to place this tremendous financial burden on the shoulders of taxpayers.
With this in mind, I am requesting the 2007 Legislature reconsider my bill from the 2005 Legislative session, as well as examine other creative health programs that could be considered in conjunction with this plan, such as changing vesting periods or providing defined contribution plans, wherein employees can structure and contribute to their own retirement health benefit goals.
Today, subsidized retiree health-care benefits are basically nonexistent in the private sector and are fast disappearing in the public sector. Many of the workers and taxpayers who fund this state burden are unable to obtain this type of benefit through their own retirement plans.
Restructuring or reducing benefits is not a task anyone should take lightly, but the long-term financial health of our state and its citizens demands that tough decisions be made. I encourage the 2007 Legislature to reconsider my proposal and develop a plan that deals head on with this growing liability.
• Kenny Guinn is the governor of Nevada.