Sunday, July 31, 2005
Copyright © Las Vegas Review-Journal

PUBLIC SAFETY PERSONNEL: Benefits report shocks officials

Local governments in Nevada facing estimated $2.8 billion liability over next 30 years

State laws requiring ironclad compensation for public safety workers who develop heart disease, lung disease or hepatitis C have local governments scrambling to identify how to pay for what is expected to be a multibillion-dollar liability over the next 30 years.

An actuarial report recently completed for the city of Las Vegas found that it faced at least $791 million of claims-related expenses.

The study, conducted by the New York firm Mercer Oliver Wyman Actuarial Consulting Inc., also reviewed North Las Vegas, Henderson, Reno, Sparks and part of the Metropolitan Police Department. The combined claims cost to all participating entities over the next three decades was estimated at $2.8 billion.

The report called the estimates conservative.

Las Vegas officials were shocked at the totals.

"We have never really had this type of information available to use before," said Vicki Robinson, manager of Insurance Services for the city. "We were all really surprised by the numbers."

The laws raising fiscal red flags for local governments were put on the books by Nevada legislators in 1965.

They have been amended and expanded in numerous sessions since then, with legislative minutes showing that changes have benefited mostly police and firefighters.

Two facets of what are called the HLH laws contribute to the costly nature of the claims, Robinson said. The first is the "presumptive" clause, which means that if police officers or firefighters develop heart or lung problems at any point in their lifetimes, it's presumed to be job-related. No connection has to be made between the disease and the workplace.

"It's a presumptive benefit," Robinson said. "You can't even talk about abuse. Unless we can demonstrate that the condition came from an individual's own behaviors, there's no abuse."

The second aspect of the law that drives up the cost of claims is that the worker has the option of electing to be permanently disabled after the development of a health problem covered by the law. It does not take into account rehabilitation or the chance for alternative employment.

The benefits include about 67 percent of an individual's wages -- or up to about $34,000 annually -- medical costs and related rehabilitation expenses. Should recipients die, the wage benefits are paid to spouses for the span of their lives. Each claim amounts to about $1 million.

"Our intent is not to take away this benefit," Robinson said. "But we do need to look at it realistically, determine what the liability is, and find a way to fund it."

Currently, Las Vegas receives about two to four new claims a year, Robinson said. The report said that number will increase significantly in coming years. By 2013, the city will probably see six to eight claims a year, adding to the cumulative cost to the city, which is self-insured.

Robinson said Las Vegas now pays out on 33 HLH claims. The city's insurance services spent about $3.2 million in the last fiscal year on claims. About $550,000 of that was for a catastrophic injury claim, Robinson said. Excluding that, 40 percent of the remaining $2.6 million went to pay for the 33 active HLH claims.

Mark Vincent, director of finance and business services for Las Vegas, said that plans need to be made now to prepare for the mushrooming liability predicted by the report. The rising costs come at a time when Nevada has limited local governments' ability to raise revenue through options like property taxes, which were capped at 3 percent annual increases by lawmakers earlier this year.

If maintaining the current level of benefits for public safety workers is the goal, Vincent said that the most likely recourse is cutting funding for nonessential services, such as parks and recreation. Another option is asking the Legislature to revisit the law and perhaps seek state assistance in bearing the cost.

"I am so thankful that there are young men and women who want to grow up and be firefighters and police officers," Vincent said. "Without those people, life would be difficult. But does that mean that the sky's the limit when it comes to their benefits?"

Although city officials have to deal with the numbers, representatives for police officers and firefighters approach the existing heart, lung and hepatitis laws from an emotional perspective.

Both Ron Dreher of the Police Officers Research Association of Nevada and Rusty McAllister, president of Professional Firefighters of Nevada, said that the law is a pact between the state and the people who take extreme risk to protect the public welfare. Police officers and firefighters spend a lifetime responding to situations that expose them to hazardous substances and stressful circumstances.

"This was their promise to us," McAllister said of the legislators who passed the laws. "It was their way of saying: 'We promise that if you get hurt, we will take care of you.' Only now that cities and counties are self-insuring, they don't want to make good on that promise they made way back when."

McAllister is a captain with the Las Vegas Fire Department. His group represents firefighters in Clark County, Las Vegas, North Las Vegas, Reno and Sparks.

McAllister and Dreher both said they are willing to work with city, county and state officials to reach a workable solution to meeting the cost of the HLH laws, although both are skeptical of the veracity of the actuarial report done for Las Vegas. Both said they would want to see additional information before drawing any conclusions about future financial burdens.

"I think there is a movement statewide by self-insurers who obviously want to do away with the conclusive presumption," Dreher said.

Excising that part of the law is something Dreher said he would oppose, as would McAllister. The presumption that the condition is job-related is vital, Dreher said. Police officers spend years working in conditions in which extreme stress sets in with no notice at all. You can't point to one call or case as the one that gave you a heart condition, Dreher said.

The opinions of the unions and associations that represent police and firefighters have significant influence on decisions about these laws, said Sen. Randolph Townsend, R-Reno.

Townsend, a veteran of Nevada government, has taken part in the numerous debates on the heart, lung and hepatitis laws that have transpired since 1979. The most significant changes, such as the adoption of the presumptive clause, grew out of a desire to recognize the importance of public safety personnel.

Assemblyman John Oceguera, D-Las Vegas, who pushed for the addition of the hepatitis C clause for firefighters in 2001, shares that opinion. Oceguera is a battalion chief for the North Las Vegas Fire Department.

"Our police, firefighters and public safety people do a job every day where there's a chance they might not come back," Oceguera said. "All they want to know is if something happens, they're going to be taken care of."

Both lawmakers are open to future discussion of the law -- in fact, they expect it. Clark County spokesman Erik Pappa said that the county is about to launch an actuarial study of its own to assess its share of future HLH liability. The county's expense is expected to exceed the city of Las Vegas' since it has a larger number of public safety personnel.

Townsend said he wants to make one thing clear before the issue unfolds in the 2007 session. When public safety employee benefits are revisited, he expects to see solutions offered, not just talk about financial problems from municipal and county governments.

"This legislator isn't going to have a lot of sympathy for Clark County on a financial problem," Townsend said. "They have more money than the state. ... I think it's a stretch to ask the state to participate in paying for something when it's the municipality that gets the benefits."