Southern Nevada’s local governments are worrying about a potential brain drain because of a looming change in taxpayer-funded retirement health benefits.
Earlier this year, the Nevada Legislature voted to cut off access to the Public Employee Benefits Program to nonstate public retirees beginning in August 2008.
Local governments are working to figure out how many workers might be leaving to take advantage of the more generous benefits and if it’s worth it to find a way to entice them to stay.
“This could have a substantial impact on the city,” said Betsy Fretwell, Las Vegas deputy city manager. “Every local government will be impacted by that legislation.”
Nonstate public retirees were granted access to the program in 2003, and it’s proven to be popular, perhaps too popular. With it, a retiree with enough years of service essentially receives free, or very inexpensive, taxpayer-subsidized health insurance.
Now, public employees have until the end of August next year to retire and join the Public Employee Benefits Program if they want to retain that benefit.
Las Vegas, North Las Vegas, Henderson and Clark County are just beginning to quantify what the impact of that deadline could be. The impact in Southern Nevada will go beyond municipalities, affecting the Clark County School District and Metropolitan Police Department.
The governments face a very real possibility of a sudden, large exodus of employees who are near retirement.
There’s also the option of enacting something at the local level to replace the state subsidy. While that might entice employees to stay, it also could be tremendously expensive.
Also clouding the issue: a judge’s decision this month that the Police Department isn’t required to pay a state-mandated subsidy for employees who join the Public Employee Benefits Program.
Leslie Johnstone, executive officer of the program, said its board met Friday and decided to appeal the judge’s ruling. No changes will be made to the program until a judge rules on the appeal, she said.
Of the four municipalities, Clark County has done the most work so far to evaluate the situation. According to a staff memo, enacting a new local subsidy would be unreasonably expensive and it probably wouldn’t do much to retain employees.
“These are folks who are reaching a certain level anyway and would probably be retiring sooner rather than later, with or without this,” said county spokesman Dan Kulin.
“Also, typically the county does not have a hard time filling most of its positions. I think that plays into it.”
The Service Employees International Union, which represents Clark County employees, did not return a phone call seeking comment.
By next year’s deadline, about 10 percent of the county’s 7,300 employees would be eligible to retire and claim the Public Employee Benefits Program subsidy without taking a reduced pension, according to a memo from Clark County comptroller Edward Finger.
If “some number” of employees retire earlier than planned, he wrote, “that may be a necessary event to move away from the expensive explicit subsidy and the higher salaries of employees with greater years of service.”
County retirees now have a choice between the Public Employee Benefits Program plan and remaining with the county’s insurance plan at subsidized rates, which are higher than those of the Public Employee Benefits Program.
The difference in cost between the plans varies and depends on the options selected and how many people are covered.
About half of the county’s retirees are in the state plan, although Finger wrote that the number continues to rise.
Las Vegas officials estimate that 250 to 300 of the city’s 3,000 employees “are in the window of time where they’re eligible,” Fretwell said.
That’s about as far as the analysis has gotten so far, she said. It’s still not clear how many of the eligible retirees will retire, if the city will take steps to retain them or how expensive those steps could be.
“We’re evaluating a variety of tools that might be at our disposal,” Fretwell said.
About 90 percent of the city’s retirees opt into the state system. They also have the option of sticking with the city’s health insurance and paying the same premiums as active city employees.
“We recognize that it’s a popular choice,” Fretwell said.
Tommy Ricketts, president of the Las Vegas City Employees Association, said it could be difficult to fill certain positions without making a replacement benefit available.
Many of the technical municipal jobs are already tough to fill, because private sector pay and benefits are competitive, he said.
Ricketts said the more expensive insurance costs retirees face without the subsidy could drive retirees to leave the area for someplace less expensive, a counterproductive development for a city that wants to attract businesses and people willing to put down roots.
“That’s what city employees are,” Ricketts said. “They’re the cornerstones of these neighborhoods. It’s kind of hypocritical to say that’s (stability) going to come from somewhere else.”
The work in North Las Vegas is just getting started, said City Manager Gregory Rose.
“We’re still trying to get our arms around this issue” and determine how many of the city’s 2,000 or so employees will be eligible.
The idea of putting through a local replacement benefit is still on the table, Rose said, although he stressed it’s one of several issues the North Las Vegas City Council will have to hash out.
“For some employees who are near retirement, that’s going to be very attractive,” Rose said. “If there are employees we want to retain, we’re going to have to offer them something.”
Like North Las Vegas, officials in Henderson “don’t have anything concrete” on the effects of the retirement legislation, said city spokeswoman Cindy Herman. But Henderson’s leaders were already aware that the city’s workers, particularly at higher levels, are getting on in years.
“They’re getting to the age of retirement,” Herman said. “That’s one of our biggest concerns.”
In fact, longtime City Manager Phil Speight is leaving in October to take a position in Washington, D.C., with U.S. Rep. Jon Porter, R-Nev.
His departure throws into sharp relief why this retiree issue is important to entities across the state, the potential loss of “institutional knowledge” retained by longtime employees.
The city is working on a succession plan to pass that knowledge along “so that those who are going to be the future leaders will have a seamless transition,” Herman said.
That information often pertains to the nitty-gritty details of city management: how policies and standards were developed, how kinks in those systems were hammered out, how project specifications were developed.
“It lets us know where we were, where we are today and where we’re going in the future,” she said.
Review-Journal writer Antonio Planas contributed to this report.