Legislation enacted in the closing days of this year’s Nevada Legislature is wreaking havoc among school district workers around the state who are being forced to consider retiring or lose part of their health care benefits.
The reaction is not likely to stop with school workers—any local government is subject to the same new law, Senate Bill 544.
The problem goes back several years to when the state retirement system subsidized post-retirement health care and local governments provided a smaller subsidy. Washoe County School District spokesperson Steve Mulvenon says in the district’s case, during local labor negotiations, management representatives urged district employees to avail themselves of the higher subsidies at the state level (which was legal under state law) in order to reduce local costs.
“And because school district employees could transfer to the state plan, which provided a larger subsidy and better benefits than we were able to, we went back to our bargaining units and suggested that we end our subsidy because people could take advantage of what the state was offering,” Mulvenon said.
The problem with this ploy was that the state incurred additional liabilities without the revenue normally paid to cover them. In a stroke, the locals had made their own workplaces more attractive to workers while sending the invoice to the state.
This didn’t go without notice, and eventually the Nevada Legislature started taking a look at the arrangement.
Senate Finance Committee chair William Raggio of Washoe County said, “What’s happened is the local governments that don’t participate and don’t pay in [to the state system] have been shuffling off their retirees to the state, and then of course that throws it out of whack. The legislature went through this for two sessions, and the decision is that they can be covered, but they have to be part of a program that is also participating with the state.” Participating, in this case, means paying into the state system.
But in enacting changes in the system, the lawmakers also included language that set a deadline for local employees to opt out of the cushy arrangement they now enjoy.
Mulvenon describes the bill as telling school district employees this: “If you don’t retire effective Nov. 30, ‘08—anything after that you’re not going to get this state subsidy. … So you’ve got to make a decision to jump ship effective November 30, ‘08 in order to get this existing subsidy. They will not let you come into that group after that date.”
The school district’s employee newsletter is more formal in its language: “One provision of SB544 states that effective November 30, 2008, employees of local governmental agencies will no longer be eligible to enroll and participate in PEBP [Public Employees Benefits Program, the state system]. … To meet the November 30, 2008, deadline, employees must actually retire and join PEBP by September 1, 2008, as PEBP has a 60-day waiting period and coverage only begins on the first of the month. Employees who retire after this date will still have the option to continue health insurance coverage through the district.”
The Nevada State Education Association has told its members, “NSEA urges those who are retiring next year or in the near future to contact PERS and discuss the possibility of retiring next year so you would be eligible to receive the stipend.”
The measure did not get full bi-cameral scrutiny. It was introduced on March 26, 2007, and sent to the Senate Finance Committee, which processed it over eight weeks and sent it to the Senate, which approved it at 6:13 p.m. on May 31, leaving just four days for the Assembly to examine it. The Assembly’s budget committee held a short hearing on June 2 at which PEBP director Leslie Johnstone, Douglas County teacher Janice Florey, university faculty lobbyist James Richardson, and retired state workers lobbyist Martin Bibb all supported the bill. One assemblymember, Ellen Koivisto of Clark County, questioned whether the measure allowed enough time for the transition. The full Assembly then approved the bill that afternoon at 4:53.
All local governments
While school districts are feeling the heaviest rumblings of worker discontent right now, word is likely to spread, and the law applies to all local governments.
All local governments
“It applies to all participants in public employee health benefits,” Raggio said.
“So now, it’s not just school districts,” Mulvenon said. But even looking just within a school district, the sweeping impact on any local government can be seen. He added, “It’s teachers, counselors, nurses, administrators, clerks, secretaries, bus drivers, custodians—it’s school district employees up and down the organization.”
The number of impacted people in all local governments is not known and is of considerable interest to administrators fearful that their agencies could be denuded of their most experienced workers, sending training costs—already chronically high in high-turnover Nevada—even higher.
Estimates of how many workers might leave are all over the place. In Clark County alone, PEBP director Leslie Johnstone has estimated the affected group at 3,500 people.
In an effort to try to get a handle on the size of the problem, some local governments and school districts around the state are surveying employees to see how many are likely to retire. Information from those surveys should be before members of the Nevada Interim Finance Committee when it meets on Nov. 14 in Carson City. The committee is one of two panels that handles legislative business when the full legislature is out of session.
On the question of what this will mean to one of Nevada’s chronic problems—luring teachers into classrooms—Mulvenon said of Washoe County, “We’re in good shape. Clark’s still hurting.”
One thing that is not clear is whether a negotiated union contract provision can be voided by a state law, and that question may be litigated. In Las Vegas, Clark Metro Police challenged a 2003 measure, A.B. 286, which required their agency to pay the subsidy for retired employees who opted for the state health plan, about 100 in all. Nevada District Judge Mark Denton ruled that because Metro already contributes to its workers health fund in compliance with its union contract, it is exempt from the law requiring public employers to pay the state plan subsidy.
However, the local subsidy is basically a pass-through from the state, which sends the money to the local governments, which then pay it to PERS.
Some teachers have blamed the enactment on Gov. Jim Gibbons, but in fact the legislation was not part of his program. It was a legislative initiative dating back to the 2003 Nevada Legislature, when an earlier measure required local governments to start paying the subsidy for its workers. That was four years before Gibbons became governor.
In 2004, Nevada Association of Counties lobbyist Robert Hadfield called A.B. 286 “only one in a recent litany of unfunded mandates”—though it was the local governments who had convinced their workers to trade up to the state program in the first place.