Board puts cuts to retiree subsidies on hold
The Public Employee Benefits Board on Thursday voted to pull back a proposed bill cutting subsidies for retired worker health benefits.
“Why are we doing this now?” asked member Jacque Ewing-Taylor, saying lawmakers might decide to make drastic cuts, “But I don’t think we have to hand them the ammunition and load the gun.”
Other members said they don’t have enough information on the impact of those changes to vote now, and pointed out they have until after the 2011 Legislature opens to make decisions.
Member Jeff Garofalo said the change was just too drastic – especially when added to the other cuts already approved by the benefits board just a month ago.
But Robin Reedy, chief of staff to Gov. Jim Gibbons, said the final decision whether to put the bill before lawmakers is up to the governor, not the benefits board. She said the administration hasn’t yet reviewed it and made a decision.
The proposal submitted to the governor’s office as a bill draft request would freeze existing subsidies for retirees and active workers at the level they currently qualify for. State workers are subsidized for retirement benefit premiums depending on how long they have worked for the state. The maximum subsidy is just under $500 for a retiree with 20 years of service.
Executive Officer Jim Wells said the proposed legislation is a compromise between keeping the existing system – which is becoming more and more expensive – and eliminating subsidies for retirees as recommended by the governor’s SAGE Commission.
In fiscal 2000, Wells said the subsidies cost the benefits program $9.2 million a year. But the cost, he said, has grown more than 13 percent a year and, in fiscal 2010, cost $31.5 million. This fiscal year, he said, that cost is $37 million and rising.
He said the proposed legislation would let those retirees and longtime workers keep the subsidy levels they’ve already earned while advising new hires they won’t get health benefit subsidies when they retire.
“We’re not eliminating any benefit to any current retiree or any benefit earned by a current employee,” he told the board.
The board directed Wells to send a letter to the governor’s office withdrawing the bill draft request. Reedy, however, said withdrawal isn’t automatic. She said she, her staff and the governor would review the proposal and decide whether to withdraw it or introduce it in the 2011 session.
The board last month approved a laundry list of changes that will save $75 million to $80 million over the biennium. Those cuts will reduce coverage for Medicare eligible retirees and dependents as well as eliminate most dental and vision coverage. More than $30 million more in savings will come from increases in costs to participants in the form of higher premiums.