Report: Retiree Benefit Changes Needed

CARSON CITY, Nev. (AP) - Many government programs and services
will suffer unless Nevada's elected officials rein in the cost of providing subsidized health care to their retirees, a new Las Vegas Chamber of Commerce study says.

Since the state isn't investing any significant amounts of money to cover the future cost of the benefits, estimated at $4 billion over the next 30 years, the bill accumulating now will come due well into the future, affecting Nevada residents who aren't even born yet, said Steve Hill, the incoming chamber chairman.

"Committing to expenditures that the next generation will be forced to make is just wrong," he said. "That's how you get into trouble down the road."

The study, "An Overview and Comparative Analysis of Nevada's State Retiree Health Insurance Subsidy," will be given to lawmakers and other officials as evidence that immediate action is needed on the critical issue.

If the state continues to pay for the benefit on a yearly ongoing basis, and the current benefit and subsidy structure remains in place, the projected cost in 2038 would be $600 million per year for retiree benefits alone, the study says.

In 2018, the projected yearly cost is nearly $150 million per year compared with the current cost of under $50 million.

The state currently provides an average annual base subsidy of $4,925 to retired workers and their families and has promised the same to the 26,346 active workers.

Eighty percent of the $4 billion unfunded liability is for the active workers.

Virtually all private-sector Nevada workers must rely on Medicare, beginning at age 65, for their health insurance needs in retirement.

Hill expects the Legislature will seek to implement reforms to the program in 2009, but said the study suggests modest tweaking won't get the job done.

Major changes, including the possibility that the benefit be eliminated outright for new state hires or curtailed for existing employees, will be required to bring the spiraling costs under control, he said.

Ben Kieckhefer, spokesman for Gov. Jim Gibbons, said the retiree health insurance unfunded liability is a concern that the governor addressed in 2007 with a $50 million appropriation. Some of that was reduced due to the state's budget problems, but Gibbons will continue to try to find ways to pay down the liability in future budgets, he said.

As to the elimination or reduction of the benefit, it is an issue that is being examined but no firm conclusions have been reached, Kieckhefer said.

(Copyright 2008 by The Associated Press. All Rights Reserved.)