The dawn of 2009 brings no symbolic relief for the state’s battered businesses and anxious workers. Economists, entrepreneurs and politicians are bracing for a dismal new year that will claim tens of thousands of jobs, an untold number of companies and force all institutions, private and public, to rethink and re-prioritize their operations.
“It’s an uncharted world we are facing here,” said Stephen M. Miller, chairman of UNLV’s Economics Department.
Customers and credit are disappearing. Retailers are losing their shirts — not selling them. Home builders are going into hibernation.
Take a drive down any major street in Clark County today and survey the businesses still open. When you take the same trip this time next year, many of those storefronts and eateries will be shuttered.
The recession will claim employers large and small. Figures synonymous with the valley’s boom will go bust.
Contrast these realities with the health of Nevada’s governments. The survival of these entities is not in doubt, the gasping of various big spenders notwithstanding. The question heading into the new year and an era-defining legislative session is whether elected officials will recognize the fragile state of the economy and launch serious efforts to make their own kingdoms leaner and more sustainable.
There simply won’t be enough tax revenue for governments to continue business as usual, as much as they’d like to.
State, county and local lawmakers have known for more than a decade that their personnel costs are out of control. Generous, guaranteed annual pay raises for public employees have swallowed larger and larger slices of budgets, but rapid population and economic growth always tempered the problem, paid the bills and provided political cover.
The state’s pension and retirement health care plans, meanwhile, have enormous, growing unfunded liabilities that over the long term threaten to make current revenue shortfalls look like a petty cash discrepancy.
Although plenty of groups — this newspaper’s editorial board among them — have been sounding fiscal alarms on these fronts for years, it has taken an economic Armageddon to make stewards of the public purse realize that compensation costs pose an immediate threat to government functions and need to be addressed right now.
Two stories from last week indicate the movement to tame these beasts finally is gaining some momentum.
On Wednesday, Las Vegas City Councilman Larry Brown gave his farewell speech to the panel. Voters last month elevated the Democrat to the Clark County Commission. The budget problems of both bodies were on Brown’s mind, as well as looming contract talks with various bargaining groups.
“The days of automatic raises, automatic this and automatic that, I think they’ll come to an end,” he said.
“Change is not only necessary, it’s mandatory now. … We can’t go back and change what we have done, but we can certainly start today and build that foundation for tomorrow.”
These are powerful words coming from a man who only three years ago defended an expensive four-year contract with Las Vegas police officers that neither the city nor the county could afford.
Then, on Thursday, the bipartisan Spending and Government Efficiency Commission voted to recommend that the Legislature enact sweeping reforms to the state’s retirement health care subsidies.
Because most public employees retire before they’re eligible for Medicare, they are given between $400 and $700 per month — on top of their pension — to help cover medical expenses. With retirees living longer and health care costs rising faster than inflation, the subsidy becomes significantly more expensive to taxpayers every year. And when thousands of longtime state workers join the ranks of the retired in the next 10 years, the subsidy’s annual cost will top nine figures.
The SAGE Commission proposed eliminating the benefit for all state employees who retire after July 1, cutting the subsidy for current retirees by 50 percent over the next two years and ending the subsidy when retirees become eligible for Medicare benefits.
Those policy changes would save the state $44 million per year in the short term and billions of dollars in the long run.
Whether the Democrat-controlled Legislature would even introduce such proposals is doubtful, but their public airing by the SAGE Commission at least plants the seed.
Given the state’s new economic challenges, elected officials can’t expect strapped workers and businesses to keep funding government pay raises, benefits and retirements that aren’t available in the private sector.
Brown said Wednesday he’s “optimistic that the realization from all employees is that things have changed.”
We’ll soon see. State workers have made it clear they’ll sue for pay raises — and perhaps invite massive layoffs — if the governor follows through on a proposed wage freeze. And county and municipal workers might be willing to accept smaller guaranteed pay raises this year to save their jobs.
That’s mighty generous. But their leverage disappeared along with the good times.
Angering public employee unions once invited a political death sentence. Today, refusing to take them on is fiscal suicide.
Glenn Cook (firstname.lastname@example.org) is an editorial writer for the Review-Journal.