Expiring benefits prompt retirement exodus

By David McGrath Schwartz

Friday, Aug. 15, 2008 | 2 a.m.

A wave of Nevada teachers, city and county workers, and other employees are retiring in time to take advantage of subsidized health benefits.

About 1,500 local government employees have indicated they will retire before the end of the year, according to Leslie Johnstone, executive officer of the state Public Employee Benefits Program.

By comparison, 433 local government employees retired under the state benefit system in 2006, and 570 in 2007.

This surge of retiring public employees ends a brief, if expensive, chapter in public employee compensation. In 2003 the state passed a law that required local governments to subsidize health benefits for retirees. The Legislature ended the requirement in 2007.

Local governments will still have to subsidize employees who retire before the deadline, which is Nov. 30. But after that date, Nevada’s governments will be more in line with the private sector, which has been moving away from offering health benefits to its retirees.

The state government will continue to subsidize its retirees’ health care.

Some local governments considered offering similar subsidies to retain veteran workers and institutional knowledge. But the cost, particularly as tax revenues are dipping, was prohibitive.

“We looked at offering our own subsidy, but it was extremely costly,” said Betsy Fretwell, deputy city manager for Las Vegas. The city expects 145 workers to retire by the end of August, compared with 62 in 2007.

Although some of the vacant positions have been filled, several likely will not be, city spokesman Jace Radke said, because of the tight budget times.

The Clark County School District predicted a surge in retirements this year. Since 2004 the total number of teachers, administrators and support employees opting for early retirement has ranged from 110 to 124. As of this week the number of early retirements had more than doubled.

Judith Hamblin, president of the Clark County Retired Education Association, said the insurance benefit isn’t the only reason for the spike in departures. Low morale because of budget cuts to schools is also a factor, she said.

Metro Police has seen a slight uptick in retirements. Assistant Sheriff Ray Flynn said officials had braced for a more significant number, and that the department could handle the retirements.

The state has offered the retiree health benefits for decades. But with rising medical costs and people living longer, the cost to the state has ballooned. Currently, it has a $4 billion unfunded liability, Johnstone said.

The state’s budget crunch is also likely to affect the benefits, which, unlike pensions, employers can legally change.

The department has been asked to keep its budget flat, despite increases in medical costs and more retirees in the system. Between now and November, the state Public Employee Benefit Program Board is expected to discuss increasing the amount that retirees and employees pay and decreasing what is covered under the plan.

“We have a huge problem in front of us,” Johnstone said.

She said the board will likely try to provide a catastrophic-coverage program and “some semblance” of wellness coverage. In January Gov. Jim Gibbons cut $30 million that was to have been set aside for future retiree benefits to deal with the current budget shortfall.

Sun reporters Sam Skolnik, Emily Richmond and Abigail Goldman contributed to this report.