Last week’s adjournment of the 2007 Legislature inspired plenty of whimpering from special interests and their media enablers, who’ve maintained that a $1 billion increase in the state’s budget will leave the government stretched and starving for revenue in just two years. Yet these same special interests — teachers unions and higher education leaders foremost among them — did nothing to chain down the Godzilla that threatens to leave all of Nevada’s public services in smoldering ruin in the decades ahead.
Another legislative session has concluded without a policy to address the billions of dollars worth of unfunded retirement benefits promised to Nevada’s public employees. As more and more well-paid workers call it a career and begin to collect their generous lifetime pensions and health-care benefits, a greater and greater share of government spending must be set aside to provide for them, leaving less and less for existing public employees and public services. The state’s retirement health care subsidy — a benefit that no longer exists in most of the private sector — is about $4 billion in the red. Its pension plan is on the hook for about $6 billion, an amount nearly equal to the state’s 2007-09 budget.
We write on this issue so frequently because very few people among the political class or the taxpaying public seem to grasp the threat of this brewing fiscal tsunami. Here’s what it boils down to: If, 10 years from now, Nevada governments have to set aside a third to half of their revenues to pay people no longer actually working on the public’s behalf, how can school districts, colleges and welfare agencies possibly meet the daily demands of an ever-growing population? If those clamoring for all kinds of new government programs and massive expansions of existing ones thought revenue was tough to come by in 2007, what makes them think it will be any easier in 2017?
Consider the package in Sunday’s Los Angeles Times. A special report headlined “Public sector reels at retiree healthcare tab” outlines the fiscal woes of various California governments and the steps they’re taking to stave off economic Armageddon.
Retirement health care subsides alone have the state $48 billion in the hole. By 2027, the Los Angeles Unified School District will have to set aside nearly 18 percent of its revenues to pay for the medical care of its retirees — and then pay their pensions on top of that. Contra Costa County’s health care liabilities are expected to exceed all of its assets by 2012, rendering it “technically insolvent,” according to a government report.
Many California governments are moving frantically to head off disaster. They’re not only eliminating benefits for younger workers and future hires, they’re taking steps to slash health care subsidies for current retirees. They recognize that imposing massive tax increases and forcing citizens to pay for benefits they’ll never enjoy would be an injustice and sow the seeds of rebellion.
Meanwhile, the Nevada Legislature can’t even pass a proposal to reform retirement benefits for as-yet unhired public employees while maintaining huge payouts for current retirees and workers. Government worker unions are so unrelenting in their defense of future members’ retirement benefits, they’re blind to the fact that the financial security of current workers and retirees is at risk. The couple of dozen lawmakers who either collect government retirement benefits or will eventually, need to look beyond their own checkbooks and act as responsible stewards.
As we wrote in March: “Nevada governments should shift all future hires into a 401(k)-style defined-contribution retirement plan that offers a modest, taxpayer-subsidized match to public employee contributions and requires only a few years of service to be fully vested.
“And, as former Gov. Kenny Guinn suggested during the 2005 Legislature, the state should make future hires ineligible for the health care subsidies currently paid to retired public employees. Government workers should have to account for health care expenses in saving for retirement like everyone else.”
Lawmakers are asleep at the wheel. The longer they wait to wake up, the worse Nevada’s nightmare will get.