Government spending should be allowed to exceed an expenditure cap as long as the money goes toward paying down the state's unfunded liabilities, Nevada lawmakers were told Monday.
The Nevada Taxpayers Association, Nevada Faculty Alliance, Retired Employees of Nevada and the Las Vegas Chamber of Commerce all asked the Senate Finance Committee to support AB196, which would allow spending above the cap in limited circumstances.
Nevada's Public Employees Benefits Program has a $4.1 billion unfunded liability, largely due to retiree health care costs. 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.
"If and when we have some money we can start pre-funding the liabilities" under AB196, said Assemblyman John Marvel, R-Battle Mountain, who sponsored the bill.
Currently, only spending on construction is exempted from the state spending cap, which is expected to have an impact on the 2009-10 budget. The cap limits spending from the state's general fund to what was spent in 1975, adjusted for population increases and inflation.
Gov. Jim Gibbons' current budget puts only $50 million toward paying off the benefit program liability, despite a report from legislative staffers that an annual contribution of at least $247 million is needed to keep the liability off financial statements. A joint budget committee voted to support the governor's recommendation earlier this month.
Nevada's Public Employee Retirement System also has an unfunded liability of about $6 billion, but unlike the liability for the benefit program, it won't negatively affect the state's bond rating. The retirement system has had a repayment plan in place for some time.
Sen. Bob Beers, R-Las Vegas, said Monday he saw Marvel's bill as just another attempt to get around the state's spending caps.
"Don't you think this tries to just kind of sweep (the unfunded liability) under the rug?" Beers asked the bill's supporters.
Controlling the unfunded liability is so important that it's worth going around the spending caps, responded George Ross, a lobbyist for the Las Vegas Chamber of Commerce.
"We actually believe it enables another piece of the pot of money to be used, that wasn't previously available," said Ross.
The Assembly voted 39-0 earlier this month to pass the bill.