Michael Hillerby testifies during a committee meeting concerning SB484 at the Legislature.
Nevada Gov. Kenny Guinn's chief of staff said Monday the state is facing an unfunded liability totaling a half-billion dollars over the next 30 years because it subsidizes health benefits for retired state workers.
Michael Hillerby told the Senate Finance Committee that SB484 would save the state $500 million by eliminating the subsidy for all state workers hired after June 30, 2006.
"If we don't do something, we're going to be faced with a huge bill with no way to pay it," he said. "In future sessions we will be faced with drastic cuts to existing retiree and active employee benefits to fund this problem."
But Marty Bibb, representing the Retired Public Employees of Nevada, argued the state is having enough trouble attracting and keeping workers without cutting benefits. Danny Coyle, representing retirees in the Association of State Federal and Municipal Employees, described the proposal as "cold hearted."
Hillerby said the liability will have to be reported in Nevada's financial records starting next year and would potentially hurt the state's bond rating and capacity.
He assured the committee there would be no change in the subsidy for current state employees. He said they would receive it upon retirement.
The proposal received solid support from local government and school district officials who said it would reverse the mandate imposed on them during the 2003 Legislature - that they contribute the same percentage subsidy for their retiree health plans the state does for its retirees. That will cost school districts an estimated $19 million over the next two years and impose similar costs on county and municipal governments across Nevada.
Dan Musgrove, representing Clark County, said senators should know there are also people who work for the state or county and earn benefits but then go into private industry for years, returning only when they retire to claim a subsidy.
He was joined by representatives from the Clark and Washoe school districts, Las Vegas and other local officials in supporting the legislation. Officials of the Reno and Las Vegas chambers of commerce supported the plan saying it would save all taxpayers' money.
Hillerby said the governor's proposal doesn't mean those retirees won't be able to get health benefits. They will still have access to the state plan but will not have the subsidy to help them pay the cost.
"We think it's fair, think it's a reasonable proposal," said Hillerby.
He also told the committee few private employers subsidize health plans for retirees.
"It's unheard of in the private sector and it's disappearing in the public sector. Nothing like this is available to the average employee," he said. "Is it fair to ask the public to fund a benefit they can't afford for themselves?"
Ron Dreher, of the Peace Officers Research Association of Nevada, disagreed saying there are a number of local entities which subsidize retiree health benefits. Reno Police, he said, pay 100 percent and Sparks, Washoe County and several Southern Nevada entities have subsidies.
Senate Minority Leader Dina Titus, D-Las Vegas, said she is concerned the effect the plan would have in a state that already has among the nation's highest percentage of uninsured residents.
"This is going to create a whole other group of people who are not insured," she said.
The average monthly subsidy for retired state workers is $316 a month. Charts Hillerby presented show some retirees receive more than $1,100 a month depending on which plan they are in and whether their spouses and children are covered.
Estimates generated by the Public Employee Benefit Program show the potential cost of the subsidies to the state rising dramatically from $152,000 10 years from now to $9.1 million in 20 years and more than $76 million a year in 30 years.
"Given the magnitude of the policy, the direction of change involved in this bill, I would very much suggest you make this the subject of an interim study as an alternative to passing this bill," said Jim Richardson, representing university employees.
