Nevada lawmakers reviewing a budget for the Public Employees Benefits Program voted Thursday to put $50 million toward paying down a $4.1 billion long-term liability that could cause trouble for the state's credit ratings.
Lawmakers on a joint Senate-Assembly budget subcommittee approved the amount recommended by Gov. Jim Gibbons, despite a staff report that an annual contribution of at least $247 million is needed to keep the liability off financial statements.
The liability will continue to grow unless benefits are changed or more money is allotted to pay it down in future budget cycles, legislators were told.
Beginning this summer, all states must report such unfunded liabilities, and Wall Street bond-rating agencies will be taking note.
If states don't take action to reduce them, a bond-rating agency could downgrade their ratings.
During the same meeting, lawmakers approved a "holiday" from premiums during the month of July because there is $19.7 million more in reserves for PEBP than anticipated in the governor's budget. Since the state pays some of the premiums, the move will save the state $8.8 million.
The amount of excess from retirees' premiums would go to paying down the liability.
Sen. Bob Coffin, D-Las Vegas, said he had concerns about the move because in a recent session, the Legislature had to contribute money to avoid raising premiums.
Sen. Bob Beers, R-Las Vegas, said the move is better than lowering rates for a year, then raising them again.
"We have had problems with the rates going all over the place and the benefits being adjusted to try to make up for it. We have, it turns out, overcharged again. I think this holiday is a more humane way to essentially reduce the rates over the next year because it doesn't have that sting at the end where you get the double whammy increase," Beers said.
Former Gov. Kenny Guinn raised the liability issue in 2005 when he argued unsuccessfully for a bill to block future state employees from participating in the health care plan after retiring - unless they paid the insurance premiums themselves.
Nationally, the unfunded portion of future costs of health care and other benefits for some 24.5 million active and retired state and local public employees has been estimated from $285 billion to as much as $1.3 trillion.