Chamber increases efforts to reform retirement and benefits programs

The Las Vegas Chamber of Commerce is stepping up its decades-long efforts to reform the state’s public employees’ retirement and benefits programs, which have a combined $10.3 billion unfunded liability.

A six-volume report commissioned by the chamber shows that the Nevada Public Employee’s Retirement System and Public Employee’s Benefits Program are among the most generous programs in the nation.

Nevada’s average local government employee pay ranks eighth-highest among public sector pay in the 50 states and District of Columbia, Hugh Anderson, chairman of the chamber’s government affairs committee, said Monday at a news conference outlining the reform agenda.

A Nevada public sector employee is paid roughly 28 percent more than a private sector employee in the same job classification.

Anderson said the two state programs must be reformed to protect the state’s long-term fiscal health and gain control of a $2 billion budget deficit that could go higher as tax revenues diminish.

“Part of the reason we’re in this situation is because of decisions made in the past,” said Anderson, an executive for Merill Lynch. “This will continue to be a problem in six years unless these issues are addressed.”

The chamber is recommending the following actions be taken by the 2009 Legislature:

— Support legislation that aims to reform the Public Employees’ Retirement System for new public employees.

— Support legislation that aims to reform the Public Employees’ Benefits Program.

— Support legislation that aims to bring local and state government employees’ wages more in line with those of the private sector.

— Support legislation that creates a “rainy day” fund for K-12 education funded by reversions that now go to the state’s general fund.

— Support legislation that modifies the existing budget stabilization fund to make the fund a more viable tool to mitigate any impact the economy may have on the general fund and the operation of state government.

“These priorities for reform will bring about significant needed change,” Anderson said. “If we do not make hard choices now to address these areas of concern, our children will be left with the consequences.”

Steve Hill, chairman of the Las Vegas Chamber of Commerce, said the business organization supports certain aspects of the governor’s proposed budget such as a freeze on cost-of-living increases, but is opposed to cuts in teachers’ and state employees’ pay. The chamber is not opposed to cutting higher education, but doesn’t agree with the level of cuts being proposed, he said.

“We need to look at areas that can be run more efficiently,” Hill said. “We need to look at all of the services that the government provides at the state level and at the local level and prioritize those.”

The first priority is to address the $6.3 billion unfunded liability of Nevada PERS, Anderson said.

Chamber recommendations include redefining “compensation” for the purpose of benefit calculations; increasing the number of years used to calculate final average salary; capping annual increases; increasing the number of years an employee must work to receive full benefits; and restricting benefit enhancements until the plan has no unfunded liability.

Secondly, the chamber wants to reform the Public Employees’ Benefits Program, a $4 billion unfunded liability. Recommendations include eliminating the PEBP retiree health care subsidy for new employees; reducing the retiree health care cost for current employees; and eliminating the retiree health care subsidy for current employees when they become eligible for Medicare.

In order to bring local government employees’ wages more in line with state government employees and those of the private sector, the chamber recommends bringing transparency to the collective bargaining process and providing balance to the state laws governing arbitration.

Currently, the public is typically not involved in the process and information is not readily available, Hill said. There’s no government Web site that provides details on existing bargaining agreements or proposed agreements.

“We think it makes sense that the process has more light of day,” Hill said. “We need to make the public aware of what the offers are and what the fiscal impact will be. We think balance needs to be brought to that process. Comparisons (of pay) seem to be with other government employees and that tends to spiral up. It’s not being compared with private sector employment.”

Regarding the “rainy day” fund for K-12 education, Anderson noted that more than $680 million has been reverted to the state’s general fund during the last 30 years. About $180 million of additional state general fund money has been needed to fund K-12 education at approved levels.

The chamber believes that reversion dollars would be best used to buffer K-12 education from inevitable downturns, Anderson said.

The fifth and final reform priority is to modify the existing budget stabilization fund. Current budget practices put essential programs at unnecessary risk by adding new programs and services during surplus years without sufficient resources to fund them in perpetuity.

Setting more revenue aside during good times will help stabilize the state’s budget during tougher economic cycles, Anderson said.

Hill said the chamber realizes that additional taxes on businesses will be part of the discussion with state legislators. The budget proposal already includes an increase in the modified business tax, a form of payroll tax, and a sales tax on services such as attorneys, accountants and engineers.

“We understand that given the situation of a $2 billion deficit, there’s going to have to be revenues raised and we realize a business tax will be part of that conversation,” Hill said.

However, it’s also important to preserve Nevada’s reputation as a business-friendly state, he said.

“The way we get out of this economic situation is through job creation. When people lose their jobs, they can’t make their house payment and they can’t do business with other businesses. People need good jobs to turn that around. Having a tax structure that hopefully encourages job creation is very important,” the senior vice president of CalPortland said.

The chamber hired Jeremy Aguero of Applied Analysis and Guy Hobbs of Hobbs, Ong & Associates to analyze government spending, particulary in terms of public employee salaries and benefits, and prepare the report.

Both Aguero and Hobbs sat on former Gov. Guinn’s task force for tax policy that recommended a gross receipts tax on businesses. That idea was opposed by both Las Vegas Chamber of Commerce and Southern Nevada chapter of National Association of Industrial and Office Properties, which prepared a study suggesting alternative tax revenues.

Kara Kelley, president and chief executive officer of the chamber, said the organization has championed such reforms in the past, but decided to commission this study to substantiate its stance.

“We want to provide good information so people can have a good dialogue,” she said. “We’ve been asking for changes to PERS for all my 14 years here. People think reforms are too difficult, but that’s not a reason for us not to go fight for them.”

 

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.

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