Posts Tagged ‘public employee benefits’

New Study Shows Nevada Taxpayers On The Hook For $4,200 Each To Fund Cost Of Public Employee Benefits

By Sean Whaley | 3:27 pm June 28th, 2011

CARSON CITY – Nevada has the 18th lowest taxpayer burden to cover unfunded public employee pension and health care costs among the states, but policy makers are still failing to adequately address the shortfall, a national organization reported in a new comprehensive analysis.

Nevada’s burden totals nearly $3.6 billion in liabilities for these benefits, which works out to $4,200 per taxpayer, according to the 50-state analysis by the Chicago-based Institute for Truth in Accounting (IFTA).

The study, which used annual reports prepared by each state’s financial chief, identified six states with a per taxpayer burden over $20,000: Connecticut was first at $41,200, followed by New Jersey at $34,600, Illinois at $26,800, Hawaii at $25,000, Kentucky at $23,800, and Massachusetts at $20,100.

The study found only four states: Nebraska, North Dakota, Utah and Wyoming that have assets available to pay their debt and obligations related to pension and retirees’ healthcare.

Taxpayer Burden In Selected States, 2009

Rank State $ Needed To Pay Bills Taxpayer Burden
50 Connecticut $53.4 billion $41,200
49 New Jersey $106.6 billion $34,600
48 Illinois $110.6 billion $26,800
47 Hawaii $11.5 billion $25,000
46 Kentucky $29 billion $23,800
18 Nevada $3.6 billion $4,200
2 North Dakota ($1.5 billion) ($6,400)
1 Wyoming ($3 billion) ($15,100)

Source: Institute for Truth in Accounting (IFTA).

The taxpayer burden represents the funds that will be needed to pay the commitments the state has already accumulated divided by the state’s taxpayers.

“If governors and legislatures had truly balanced each state’s budget, no taxpayer’s financial burden would exist,” said Sheila Weinberg, founder and CEO of the institute.

Sheila Weinberg, founder and CEO of the Institute for Truth In Accounting, says Nevada policy makers are failing to truly balance the state budget./Photo: IFTA.

The study reviewed each state’s Comprehensive Annual Financial Report to offset assets against liabilities. For the first time, a detailed analysis of pension and healthcare liabilities uncovered the states’ actual obligations. From these calculations, the institute was able to determine the taxpayer’s burden.

“The taxpayers need to really hold their elected officials’ feet to the fire about really balancing their budget,” Weinberg said in a phone interview. “They’ve been telling the taxpayers that they have been balancing their budgets, but because of not including the true compensation costs in the budget numbers, they have actually been putting the state further and further into debt.”

While Nevada may be doing better than other states, the budget should be balanced and the number should be zero, Weinberg said.

“Just because you’re not as bad as other states doesn’t mean you are doing good,” she said.

The Nevada analysis is also is somewhat generous because it only cites the public employee pension liability generated from state employees, not all the other local employee groups covered in the plan, Weinberg said. Otherwise the number would be much higher in Nevada, she said.

“The state has only put 57 cents away for every dollar that they have promised,” Weinberg said.

Employee compensation packages include retirement benefits. A portion of these benefits is earned each period and should be included in the current budget as a portion of current employee compensation costs, the group said in its report. Instead most states handle many of benefits on a “pay-as-you-go” basis.  This obligates future taxpayers to cover these past costs.

“Though 49 of the 50 states have constitutional or legal requirements to balance budgets, most states employ a variety of financial maneuvers to circumvent this requirement,” said Roger Nelson, chairman of IFTA and former vice chairman of Ernst & Young. “The largest of these maneuvers is related to employee compensation.”

Roger Nelson, chairman of IFTA, says states employ financial maneuvers to avoid balanced budget requirements./Photo: Institute For Truth In Accounting

Nevada pays for the health insurance costs of its retired state employees on a “pay as you go” basis. In a major policy shift this past legislative session, however, lawmakers voted to end the health insurance retiree subsidy for newly hired state employees starting Jan. 1, 2012.

The end of the retiree subsidy was sought by Republican lawmakers and business groups, including the Las Vegas Chamber of Commerce.

Weinberg called the change a good start, but said it did nothing to erase the liability that has already been accumulated, which is approaching the $2 billion mark.

The state’s separately managed Public Employees’ Retirement System, the pension plan that covers nearly all public sector workers in Nevada, is funded based on projections by an independent actuary. It had a $10 billion long-term unfunded liability as of June 30, 2010. The plan was 70.5 percent fully funded, down from 72.5 percent in the previous year. At its high point in 2000 the plan was 85 percent funded.

GOP Gov. Brian Sandoval proposed a change to the retirement plan to include a “defined contribution” share for state workers to reduce the long-term liabilities, but the proposal did not get introduced in the 2011 session. Instead, lawmakers approved a study of PERS for consideration in the 2013 session.

Geoffrey Lawrence, deputy director of policy for the Nevada Policy Research Institute, said legislative studies do not typically generate change in subsequent legislative sessions, however.

“When you say the word study it doesn’t create a lot of optimism because it usually doesn’t translate into action,” he said.

The 2009 Legislature did make some changes to the retirement plan, including increasing the retirement age to 62 from 60 for newly hired employees.

While many advocate a complete change to a defined contribution plan from the current defined benefit plan, where retired public employees are guaranteed a set retirement check upon retirement based on salary and years of service, others argue Nevada’s plan is well managed and will be fully-funded over time.

Audio clips:

Sheila Weinberg, founder and CEO of the Institute for Truth in Accounting, says taxpayers need to hold lawmakers accountable on the budget:

062811Weinberg1 :30 further into debt.”

Weinberg says Nevada is not funding its full financial obligation:

062811Weinberg2 :15 they have promised.”

Geoffrey Lawrence of NPRI questions whether a study of the PERS liability will result in real reform:

062811Lawrence :15 translate into action.”

Legislature Votes To Cut Pay To State And University Workers

By Andrew Doughman | 3:54 pm May 10th, 2011

CARSON CITY – Legislators on money committees today approved on a party-line vote a 4.8 percent salary cut to state and higher education employees.

The proposal would include a 2.3 percent cut through furloughs – about six days per year – and a 2.5 percent salary reduction.

Gov. Brian Sandoval had proposed in his budget a 5 percent salary cut to state and higher education workers.

Speaker John Oceguera, D-Las Vegas, advanced the 4.8 percent “compromise” cut. Legislative staff said it would create a shortfall between $7.5 and $10 million in the governor’s budget.

The vote passed with all Democrats voting for the idea and all Republicans voting against it. In an earlier vote, Republicans voted to follow the governor’s recommendation while Democrats voted against it.

Republicans characterized the salary reductions and cuts to benefits as similar to reductions in the private sector.

“What we are seeing here is a continuation of that downsizing,” said Assemblyman Pat Hickey, R-Reno.

Democrats contended that government does not operate like private businesses; rather than seeing less business during a recession, more people depend on state services in a recession.

“If we are going to apply true business principles to government, we should be hiring right now … our demand is way up,” said Assemblyman Marcus Conklin, D-Las Vegas.

Union representatives and higher education faculty testified against the cuts, saying that they much preferred furloughs to salary cuts.

Danny Thompson of the AFL-CIO also said that reductions in the governor’s budget have provoked a grassroots movement that could punish Republicans during next year’s elections.

“I would caution you that if you don’t solve this problem, that organic uprising that has already happened is going to spread and the people are going to solve this problem,” Thompson said.

Legislators also voted to continue suspending merit and longevity pay as well as eliminating holiday premium pay for higher education and state workers. Legislative staff said that these decisions should save the state $71.5 million.

Yesterday, legislators voted to curtail health care benefits for public sector employees.

Public sector employee union representatives said they have already endured these reductions in pay and benefits for several years as Nevada has struggled through the recession.

“It is so totally unfair what we are doing to our state government,” said Jan Gilbert of the Progressive Leadership Alliance of Nevada.

The governor has earlier argued that furlough days resulted in less productivity from employees, causing longer lines at places such as the DMV.

None of the votes are binding, and the Legislature may decide to alter the proposals as they finalize the budget.

Legislative committees last week voted not to reduce pay for school district employees nor did they choose to suspend merit pay for school district employees.

Those decisions could cost the state $402 million during the next two years.

Democrats last week proposed a revenue package totaling about $1.2 billion comprising a continuation of taxes approved by the 2009 Legislature and scheduled to end this year as well as a tax on businesses’ gross revenue and a sales tax on some services.

If passed, these tax increases could pay for that $402 million cost.

Senate Majority Leader Steven Horsford, D-Las Vegas, also noted a potential budget consequence in cutting salaries. He said that the sustained compensation cuts could lead some state workers to favor retirement over working for less.

Dana Bilyeu of the Public Employees’ Retirement System estimated that 2,000 current state employees are eligible to collect full retirement benefits.

Should they choose to retire, the state would have an unfunded obligation to cash out those retiring employees for accrued sick leave, she said.

Bilyeu and others in the committee room could not estimate a cost, but she said about 1,000 more teachers than usual retired due to changes in benefits following the 2007 legislative session, causing the state to lose millions of dollars.