Business lobby digs in for budget battle

By David McGrath Schwartz

Thursday, Oct. 16, 2008 | 2 a.m.

In the run-up to the 2009 legislative session, someone, at some point, will propose a tax on Nevada’s businesses to soften the budget cuts that are coming.

The Las Vegas Chamber of Commerce knows this and has been preparing. Since June the business group has been releasing a series of studies looking at public sector compensation. They paint a picture of well-paid government employees with pensions and health benefits that exceed those offered in the private sector and threaten to consume the state’s dwindling resources.

When elected officials, advocacy groups and labor unions complain about the looming 14 percent budget cuts, the deepest since the Great Depression, it’s likely that the chamber’s studies will be waved as evidence of fat in the budget.

The reports were compiled by the respected companies Hobbs, Ong and Associates and Applied Analysis. The findings raise issues that might merit serious discussion. But experts say many practical solutions proposed in the studies would result in long-term savings, not a fix to the immediate budget crisis.

The first study, released in June as the Legislature was preparing for a special session to address the budget shortfall, found that public sector employees make, on average, $10,400 more than their private sector counterparts.

The second study, released the same day, concluded that government employees in Nevada were better paid than most public sector workers in other states. (Nevada teacher salaries, however, are below the national average.)

The most recent chamber-sponsored reports — arguably the most important for the state’s long-term fiscal health — looked at the state’s pension fund and retiree health benefits. The health plan, the Nevada Public Employees’ Benefits Program, is severely underfunded and failing to address the problem will push up costs, affecting “state government’s ability to provide core services,” according to the report.

Hugh Anderson, chairman of the chamber’s government affairs board, said the studies were intended to provide policymakers with a foundation of facts.

“The overarching message is that we have a budget pie that is very, very sharply being contracted in places for the most vulnerable, like education and health and human services,” he said. “We have an ever-growing consumption of resources (going) to employee salaries and obligations.”

Dennis Mallory, chief of staff of the Nevada American Federation of State, County and Municipal Employees, said the chamber’s agenda is clear: “They’re obviously trying to build momentum to take any discussion of taxes off the table.”

Cutting salaries and benefits is a possible long-term solution. (Republican former Gov. Kenny Guinn has said change in retiree health benefits, in particular, is one of the most important issues facing the state.)

Yet many of the sources of short-term savings come with significant downsides.

Existing pension benefits are legally protected, making them difficult if not impossible to cut. Only the sharpest of cuts in subsidized health benefits would generate significant savings in the short term.

Looking at salaries, local government workers make more, on average, than state workers. The Legislature has little say in setting local government pay.

Jeremy Aguero, a principal at Applied Analysis, said cuts can be made for immediate savings, but those savings would be modest.

Still, Anderson, of the Chamber of Commerce, thinks one reason the state is facing a short-term budget crisis is that leaders have failed to act to address the long-term problems.

“Our leaders have known about the problem for many years, but it has been very politically expedient to push it off,” Anderson said. “It’s no longer out there. It’s here.”