Entitled to the taxpayer subsidy

Still trying to make sense of last week’s Nevada Supreme Court ruling on health insurance for retired public employees? The complicated case can be boiled down to this: You’re still stuck with a big, ever-growing bill for benefits of a sort that have all but vanished from the private sector.

The Supreme Court’s decision overturned a ruling by Clark County District Judge Mark Denton, who last year held that the Las Vegas Metropolitan Police Department did not have to pay the state a subsidy for the medical coverage of about 150 people retired from the force. Had the court upheld Judge Denton’s ruling, those retirees — as well as thousands of other recent local government retirees — would have had to spend some of their generous pension checks seeking more costly alternatives for health care coverage, according to Leslie Johnstone, chief of the state program. (The horror!) Now they’ll remain covered under a benefit they were never meant to have in the first place.

Before 2003, retirees from local entities such as cities and school districts had to keep the insurance that covered them as employees. Then the Legislature decided to give them an option: join the state’s Public Employees Benefit Program, which offers more generous subsidies, at the expense of the local government employer.

Naturally, retirees began shifting to the state worker program in droves, forcing local governments to divert a disproportionate amount of revenue from their own plans while burdening the state plan with higher costs and risks. So in 2007, the Legislature corrected the mistake by eliminating the option for local government workers. Starting Nov. 30, 2008, the system will return to pre-2003 practices.

The Police Department argued that lawmakers had saddled them (meaning Clark County taxpayers) with unfair costs. “We brought this lawsuit because we didn’t feel we had any authority to spend the taxpayers’ money in this manner,” said Liesl Freedman, the department’s counsel.

But the Supreme Court held that these 150 ex-cops, about 1,900 former Clark County School District teachers and other fortuitous retirees, as well as those who sneak in the door before this year’s deadline, can continue cashing in. “Local government retirees who were previously covered by health trusts and who elected PEBP coverage upon retirement are entitled to the statutory subsidy,” justices wrote, unintentionally encouraging thousands more local government workers to throw early retirement parties.

Taxpayers are struggling to make ends meet these days, their own health plans growing more expensive and their retirement coverage limited to Medicare and out-of-pocket supplementary policies. Because of rising health care costs, the vast majority of workers have no choice but to work until Medicare eligibility kicks in. Now they’re stuck with millions of dollars in increased annual costs to provide superior health coverage for people who’ve called it quits in their 50s and early 60s.

The Public Employees Benefit Program already has more than $4 billion in long-term, unfunded liabilities. It wasn’t sustainable before this ruling — it’s even weaker now.

The high court’s ruling should give lawmakers even more incentive to reform the system by abolishing all retirement health care subsidies for future public-sector hires.

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