SAGE advice on state budget

CARSON CITY -- State employee health care benefits would be brought into line with what private companies in Nevada offer their employees under recommendations approved Thursday by the Spending and Government Efficiency Commission.

SAGE Commission members voted overwhelmingly to recommend elimination of health care subsidies for all state employees who retire after July 1, including public school teachers and university system retirees, and to cut subsidies to existing retirees by 50 percent by July 1, 2010.

They also urged the state to end subsidies for almost all retirees once they become eligible for Medicare at age 65.

Medicare is the primary source of health care for most employees who retire from private companies.

Retired state employees are eligible for $396 to $696 a month health care subsidies. The average employee retires at age 60 and then begins receiving the subsidies.

Some retire in their early 50s.

The commission, appointed by Gov. Jim Gibbons, also recommended that health care benefits that employees and their families receive should be reduced to a level comparable to what private industry offers.

The SAGE Commission's recommendations were criticized by Lynn Warne, president of the Nevada State Education Association, and Jim Richardson, a lobbyist for the University Faculty Alliance.

Warne said while current teachers are not covered under the state's health care program, retired teachers are.

"This certainly concerns us," Warne said. "They are taking away benefits from folks on fixed incomes."

But she questioned whether the Legislature would adopt the recommendations.

"I wonder how many legs these proposals will have when they get to a Democrat-controlled Legislature," Warne said.

Richardson called the recommendations "draconian" and predicted they would prevent universities from recruiting quality professors.

He said professors' pay in Nevada is below the national average and the heath care benefits help attract good professors from other states.

Richardson said he hoped Gibbons will not include the recommendations in his budget for the 2009-10 and 2010-11 fiscal years.

Richardson said the SAGE Commission's recommendations came out of a Las Vegas Chamber of Commerce study that was inaccurate, and most commission members are Republicans.

Even if Gibbons does recommend the cuts, Richardson doubts the Democratically controlled Legislature would approve the changes in the health care and retirement subsidy programs.

But Veronica Meter, the chamber's vice president for government affairs, applauded the SAGE Commission for its work in trying to find ways to reduce government spending.

"We are facing some unprecedented times in our economy," Meter said. "It calls for some difficult decisions."

The SAGE Commission said its recommendations would save the state an estimated $44 million a year.

However, nothing would change unless the proposals are backed by the Legislature, which begins its 120-day 2009 session on Feb. 2.

Democrats control both houses of the Legislature for the first time since 1991.

A typical state employee pays between nothing and $28 a month for health care coverage for themselves and $62 to $194 a month for dependent care coverage for a family of four.

Under the SAGE Commission recommendation, the amount paid by the employees would be increased so it is within 5 percent of the costs paid by private companies in Nevada with more than 100 employees.

A survey would be conducted to determine that amount.

The 13-member commission approved the changes with only three to five members opposed during four separate votes. Members met through a telephone conference call.

Former Assemblyman David Goldwater, D-Las Vegas, and former Las Vegas Mayor Jan Jones, once a Democratic candidate for governor, voted no on all the proposals.

They said it was inappropriate to reduce benefits to employees who have worked for government for years and depended on receiving them.

Goldwater called it "patently unfair" to reduce benefits for existing employees, but said he would back the changes for new hires.

During Thursday's meeting, members said some benefits still would be available for about 300 retired employees who are not eligible for Medicare.

The state government and its employees began paying into the Medicare fund in 1986. Those employees retired before then, or did not make the 40 quarters of payments required to qualify for Medicare.

SAGE Commission Chairman Bruce James said state government has no choice but to cut benefits because it must "bring its payroll down." The recommendations are a way of doing that, he said.

The alternative to not approving such changes would be "people losing their jobs," he said.

Leslie Johnstone, executive officer of the State of Nevada Employees' Benefits Program, said after the meeting that she doubted the plan to reduce the retirement subsidies would lead to a large number of early retirements in 2009.

Johnstone said the recommendations also call for reducing these subsidies and ending them completely when employees begin using Medicare.

As a result, she said, there would not be much incentive to retire. By remaining on the job, the retirement pensions might increase, offsetting a portion of the subsidy losses, she said.

In a news conference after the Dec. 8 special legislative session, Gibbons said he intended to include the SAGE Commission's recommendations in bills and the budget he presents to the Legislature next month.

But Richardson said Gibbons has agreed to meet with him first before he offers changes to health care programs.

State Budget Director Andrew Clinger said he was not familiar with the new SAGE Commission recommendations and did not know whether Gibbons will incorporate them in his budget.

But he did agree with Johnstone that the recommendations likely will not lead to mass retirements of state employees.

By law, Gibbons must submit a two-year budget in line with the spending limit set by the state Economic Forum. The forum on Dec. 1 estimated state government will have $5.65 billion in tax revenue available in the next two-year budget period.

That is $1.2 billion less than what the Legislature approved for the current two-year budget when it adjourned in June 2007.

Since then Gibbons and legislators have cut spending by $1.5 billion because of declining tax revenues, including a 9.1 percent reduction in the current fiscal year.

Only about a third of the cuts, however, have come in operating expenses of state agencies.

Gibbons and legislators balanced the budget through exhausting the state rainy day fund, shelving new programs and building construction, and through loans.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.