Nevada budget picture growing bleaker

Tuesday, Nov. 26, 2002 | 11:15 a.m.

CARSON CITY -- The picture for the upcoming state budget is growing worse.

The costs for health care, workers compensation and retirement for state employees are going to skyrocket in the coming fiscal year, growing at a rate faster than the tax collections, officials said.

The hit on the budget for the coming two fiscal years on these items hasn't been estimated. But it will be a multimillion-dollar increase at a time when tax revenues are predicted to come in at a slow to moderate pace.

"This is a deal where we can't buy a break," state Budget Director Perry Comeaux said.

Last week the state Risk Management Division revealed it will have to raise premiums paid by state agencies by 113 percent for the coming fiscal year and 71 percent in the 2005 fiscal year. This system pays for medical and rehabilitation costs for state workers hurt on the job.

Insurance premiums paid on state buildings are expected to rise 70.5 percent.

Also last week the state Public Employees Retirement System told a legislative committee that the premium for regular members in the pension system will increase from 18.75 percent to 20.25 percent.

The Legislature, at its special session this year, authorized an additional $18 million for the struggling workers health insurance program. That funding was effective last month. That should keep the program afloat until July, officials said. The Public Employees Benefits System, which governs the program, has asked for a 6.4 percent increase starting next fiscal year and a 12.6 percent increase in July 2004.

These proposed increases outstrip the preliminary estimates of the Economic Forum, which predicts how much taxes the state will collect in the next two fiscal years. The forum meets Monday to make its final forecasts. The group had previously estimated that state tax revenue would grow 4.5 percent next fiscal year and 5.3 percent the following fiscal year.

"If I get any good news, I will call you," Comeaux jokingly told a reporter.

Sue Dunt, administrator of the state Risk Management Division, said a $4 million reserve fund in the workers compensation program has dwindled to $250,000.

The state has a $1 million deductible, meaning it pays the first $1 million of any claim. And then it has a policy with insurance company AIG to cover the rest. She said she expects a 33 percent increase in the private insurance premium. The Legislative Interim Finance allowed her to transfer $2 million from the reserve to pay for the expected increase.

She said insurance costs since have risen dramatically since Sept. 11, 2001. Private insurance companies that invest heavily in the stock market have experienced big losses, like the rest of the market shareholders.

In addition, the state is paying two big claims. A Nevada Highway Patrol trooper was struck by a speeding car in Las Vegas in April 2001. The bills are expected to run in excess of $4 million. The state must pay the first $750,000, because that was the former deductible.

Also a female correctional officer suffered extensive injuries when a grenade exploded in her hand at prison at Lovelock. The state is expected to pay about $720,000 in that case.

State agencies now pay $1.58 per $100 of payroll for workers compensation coverage. That rate would rise to $3.36 starting in July, Dunt said.

In 1995, however, the rate was $4.65 per $100 of payroll. That prompted the state to start an aggressive safety campaign and also to take other measures to drop the rate to its present level of $1.58.

The state's health insurance program lost $16.6 million last fiscal year, Forrest "Woody" Thorne, the program's executive officer, said. In 1999, the state had to pump an additional $26 million into the fund.

Senate Majority Leader Bill Raggio, R-Reno, said last week it may be impossible for the state to fund the full insurance system if the costs keep escalating at the present clip. Assemblywoman Chris Giunchigliani, D-Las Vegas, said the system should examine "radical" changes, possibility joining with all other governments in Nevada to obtain "better buying power."

The state now pays $465 a month for each of its 15,000 employees. The per employee monthly rate would rise to $495 per employee next fiscal year and to $558 the following year. Employees pay the cost of dependents. The state also provides a subsidy of $263 a month for a retired employee and that monthly cost would rise to $280 next year and $316 the following year. There are about 5,000 retired state employees.

George Pyne, executive officer of the Public Employees Retirement System, said the "difficult investment environment" has hurt the pension fund with about 85,000 members and a $13 billion portfolio.

The system has 45 percent of its money in the stock market, 45 percent in fixed investments and 10 percent in real estate. Pyne said the 1.5 percent cost increase is to be split equally by the employer and the employee. Last fiscal year the return on investment was a minus 2.8 percent. That still put the system in the top 10-15 percent in the nation in retirement funds, he said.

The contribution rate has been about 18 percent for the last 10 years. While the premium for regular employees will rise to 20.25 percent, there will be no increase in the police and firefighters retirement fund where the present contribution is 28.5 percent.

"It's a tough environment for everybody," Pyne said.