ASSEMBLY COMMITTEE MINUTES

MINUTES OF THE meeting

of the

ASSEMBLY Committee on Government Affairs

Seventy-Second Session

March 19, 2003

The Committee on Government Affairswas called to order at 8:00 a.m., on Wednesday, March 19, 2003. Chairman Mark Manendo presided in Room 3143 of the Legislative Building, Carson City, Nevada, and via simultaneous videoconference, in Room 4406 of the Grant Sawyer State Office Building, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

Note: These minutes are compiled in the modified verbatim style. Bracketed material indicates language used to clarify and further describe testimony. Actions of the Committee are presented in the traditional legislative style.

COMMITTEE MEMBERS PRESENT:

Mr. Mark Manendo, Chairman

Mr. Wendell P. Williams, Vice Chairman

Mr. Kelvin Atkinson

Mr. Chad Christensen

Mr. Tom Collins

Mr. Pete Goicoechea

Mr. Tom Grady

Mr. Joe Hardy

Mr. Ron Knecht

Mrs. Ellen Koivisto

Mr. Bob McCleary

Ms. Peggy Pierce

Ms. Valerie Weber

COMMITTEE MEMBERS ABSENT:

None

GUEST LEGISLATORS PRESENT:

None

STAFF MEMBERS PRESENT:

Susan Scholley, Committee Policy Analyst

Eileen O'Grady, Committee Counsel

Rosemary Zienter, Committee Secretary

OTHERS PRESENT:

Martin Bibb, Executive Director, Retired Public Employees of Nevada

Mary Henderson, Lobbyist and Government Consultant, Nevada League of Cities and Municipalities

James Richardson, Director, Judicial Studies Program; Professor, Sociology and Judicial Studies, University of Nevada, Reno

P. Forrest “Woody” Thorne, Executive Officer, State of Nevada Public Employees’ Benefits Program

Al Bellister, Director of Research, Nevada State Education Association

Nita Stonestreet, Non-State Retiree

Gene Girard, Non-State Retiree

Daryl Moore, Director of Human Resources with the City of Henderson

Steve Miller, Employees’ Benefits Administrator for the City of Las Vegas

Roselee Portillo, Non-State Retiree

Wendy Reinan, Non-State Retiree

Judy Cameron, Non-State Retiree

Doug Bierman, DATAMAX Senior Research Associate, Intertech Services Corporation

Danny Coyle, State of Nevada Employees’ Association, American Federation of State, County, and Municipal Employees, Local 4041

Chairman Manendo:

Good morning, Committee. Madam Secretary, will you please call the roll. Committee, please turn to the agenda. We have Assembly Bill 286. This is Mrs. Koivisto’s bill. Mr. Bibb, would you be so kind as to join Mrs. Koivisto at the witness stand. Good morning.

Assembly Bill 286: Revises provisions governing health insurance for retired officers and employees of local governments. (BDR 23-1124)

Assemblywoman Koivisto:

Good morning. Thank you, Mr. Chair, and Committee members. I’m Ellen Koivisto, Assembly District 14, Clark County. I know all of you have gotten letters, e-mails, and phone calls about the PEBP [Public Employees’ Benefits Program] retirees, and the horrible rates that some of them are having to pay. What we‘re talking about here isn’t just numbers. This isn’t just a spreadsheet we’re talking about, this is people. Those in Las Vegas, and a lot of active state retirees, all have a stake—or active state employees—all have a stake in this. The system is broken, and we’ve got to do whatever we can do to at least patch it together until we can have a study and probably rebuild it from the ground up. In the meantime, we have to try and help people. Over the last few days I’ve met with folks from some of the cities and other local governments, and these people are willing to step up to the plate, these people are willing to work with us to try to come to some kind of solution and see if we can’t do something.

What A.B. 286 does is create an open enrollment period for folks from non-state entities to go back to the health insurance system of the entity that they retired from. It’s a one-time shot. They take the option or not, one time. If they choose to do that, they’re not rated separately, they’re rated with the pool. If they decide not to go back to the entity they retired from, if they want to stay with PEBP, their former employer will pay a subsidy to PEBP, like the state pays for state retirees, and there is a difference. I know we hear people say, I was paid by the state. That’s not exactly true. If you got a check from the Clark County School District, that’s who you were paid by, that’s who you were employed by, not the state of Nevada. It’s all public money, and perhaps that’s why it is called the Public Employees’ Benefits System. That essentially, is what the bill does.

I have handed out to you information faxed to me from Wendy Reinan in Las Vegas and some paperwork showing what happens with retirees [Exhibit C]. There are a couple of different charts that were put together by Susan Scholley, our Research Analyst. The charts show our non-state retirees and the numbers. There’s a big number of entity unknown, and perhaps Mr. Thorne can help us with that, I’m not sure.

It appears to me that the state of Nevada, and the Washoe County School District and Carson City, are the only ones who pay anything towards their retirees, if I’m reading this long chart right. When I talk to the folks from the City of Henderson, the reason that they don’t pay a subsidy to their retirees is [that] they get paid the money on the front end by negotiating for a higher wage. State employees don’t have that luxury, so for those who, perhaps, resent the fact that state employees get a subsidy, that is a matter of fundamental fairness, because these state retirees have gone for many years at a lower rate of pay. So, I think with that I’ll open it to questions. I know there are a lot of people that are going to want to talk about this.

Chairman Manendo:

Ms. Koivisto, we certainly appreciate, as do hundreds of folks who have contacted my office, and I’m sure many of us have received e-mails, and letters, and phone calls, and they appreciate their opportunity to be heard in this forum, and we appreciate you bringing this very important piece of legislation forward. Let’s have, if it’s your request, we would have Mr. Bibb testify, and then we’ll do questions after that. Mr. Bibb, good morning.

Martin Bibb, Executive Director, Retired Public Employees of Nevada:

Good morning, Mr. Chairman and Committee members. Thank you for the opportunity. [Introduced himself] We represent all of the aforementioned city, county, state, school district, police, fire, other local government type of employees. In all, there are about 24,000 retired public employees in the state, of whom about 8,000 belong to RPEN [Retired Public Employees of Nevada]. It’s interesting, we were formed in 1977—this is not a sales pitch, just some history. The first executive officer of the Public Employees’ Retirement System, who found that when he retired—his name was Ken Buck—that two issues particularly drove them. First was the shrinking amount of retirement they had by virtue of the loss to inflation, after having been retired at a certain age; and secondly, the increasing amount of what was available through retirement to pay for an increasing percentage of health care costs that their pension must be used for. For that reason, we have made group health insurance an issue for a long time.

First, we would like to thank Assemblywoman Koivisto for A.B. 286, and also to the Chair and this Committee, which has heard, already, extensive testimony relative to the entire issue of group insurance. Also to Assemblywoman Giunchigliani who has a bill that deals with some of this, to Assemblyman Goicoechea who has another bill that deals with some of this, and also to the interim legislative study which is proposed that would deal with this in a broad sense, and we think that that may be part of the solution.

We strongly believe the problem is really divided into a couple of areas. The short-term relief is a real key issue for those who are in the plan currently, and then on the long-term side, I think this interim legislative study is crucial. The PEBP Board met a week or so ago and came up with some alternatives on the short-term side which, we think at least, give people some opportunity.

As the Committee is well aware, the rates for non-state retirees in this program, based on their own personal actuarial experience, doubled. The rates doubled between 2002 calendar year and the current plan year, which actually runs from January 2003 to June 2003, at which point it will then fall into a July to June cycle to match the state’s fiscal year, which makes great sense.

For the plan year that will begin on July 1, there is a proposal for the base plan that would save non-state retired folks a little bit of money. There are some basic plan changes that would increase, for example, the deductible to $500 But the PEBP Board voted for a couple of other alternatives that at least may be helpful, and that is to have an increased deductible option for some folks in the plan, or basically for everyone in the plan; but it may be of particular interest to those whose rates doubled. There will be a $1,000-option deductible, instead of the $500, and there will also be a $2,500 option. A lot of folks would ask why it would be that high, because then it would seem to serve almost as a catastrophic type plan. But when your rates have gone up by 100 percent plus, those are at least some options. I know in one case, for the individual, it saves about 15 percent off premium. The person whose rate increased from 2002 to a point of about $350 to $711 would see that drop to about $594 if they took the higher deductible. We think for the short haul that is going to be at least some relief for that non-state person in the plan. On the long haul, we think the questions that need to be addressed are contained in a variety of places, some of those obviously in Assembly Bill 286, which Ms. Koivisto brings to you this morning.

Then there is the notion of commingling actives and retirees of non-state entities. The notion of whether or not they should, perhaps, have an open enrollment or reenrollment into those plans, and additionally, the question of subsidy; should the local government subsidize their retirees’ health care? These are all very critical issues, and we think they all need to be addressed and discussed.

I would think that with the sponsor of A.B. 286’s concurrence, those are perhaps things—regardless of how this range of bills that deals with this subject are handled by this session—are things that would need, I believe, to be considered in an interim study. I think they would be highly appropriate because they’re issues that are really pressing on the folks who have to pay these rates. There’s also another notion that I know Mr. Grady has brought up a time or two before this Committee, and that’s a question of pre-funding health care insurance costs, meaning that you would find a vehicle to contribute to during your working years which would then, it might be something like a PERS [Public Employees’ Retirement System] type of fund, that would then generate interest and grow, which you could then access at the time of retirement to help offset your health care costs. I think that’s another element that could probably be visited. With that, I will stop my remarks and try to respond to any questions, and turn it back to Ms. Koivisto.

Chairman Manendo:

We appreciate that. Thank you. I know there has been some discussion about an interim study. I’m sorry, we were trying to do a quick search to find it. I know it’s not in A. B. 286.

Marty Bibb:

No, I believe, Mr. Chair, the bill draft, if I’m not mistaken was 1111 [BDR R‑1111, later introduced as A.C.R. 10]. That may not be the correct number. I’m sure the staff can bring you back to tether, if I’m off base.

Chairman Manendo:

I know this does have, as you mentioned, a concurrent referral. This bill should be exempt at that point when it gets to Ways and Means, so that we could have further discussion throughout the session on all these different pieces of legislation that are out there. Questions, Committee? Mr. Goicoechea.

Assemblyman Goicoechea:

Thank you, Mr. Chairman. The only question I have, under A.B. 286, if a person is a participant in the PEBP presently as a non-state active and then goes into retirement, would they be at the same rate then as a state participant where they are active going into retirement, or are we still going to be looking at a different rate under A.B. 286?

Assemblywoman Koivisto:

I’m not sure, Mr. Chairman, through you to Mr. Goicoechea, I’m not sure that’s even addressed in the bill. But I think, as a matter of fairness, if a person as an active employee is covered under PEBP, certainly as a retiree, they shouldn’t be listed as a non-state. And it seems to me that if these folks are all commingled, there wouldn’t be a state/non-state anymore, I would hope.

Assemblyman Goicoechea:

Then how about PEBP retirees that are presently in the system again, would they be commingled? I think this requires that they be completely commingled, and I’m just trying to clarify that. Is that your understanding?

Assemblywoman Koivisto:

That’s the way I’m reading it too.

Assemblywoman Pierce:

Thank you. Would you tell me again what happens if you don’t go back into the pool and do this one-shot thing.

Assemblywoman Koivisto:

If you don’t, Mr. Chairman, through you and to Ms. Pierce, if you don’t go back into the insurance plan of the employer you retired from, then that employer would pay a subsidy to PEBP, similar to what the state does for state employees. I’m not locked into a number on that, and as I told the Chairman before we sat down, I’ve spoken with several people from the local governments. We’re going to be working together to try to come up with some kind of fair plan, because these are people we are talking about. In most cases, these are people who put in a lot of years working for an employer and maybe not at very high pay, but these were all loyal employees and I think that they expected, when they retired, they’d be able to enjoy their retirement. When their whole retirement, plus a personal check out of their checking account, which perhaps they even had to borrow money for just to maintain health care coverage, then there is something wrong with that picture in the richest country in the world.

Chairman Manendo:

Thank you, Ms. Pierce. Mr. Christensen.

Assemblyman Christensen:

Thank you, Mr. Chairman. Ms. Koivisto, first of all, this is a great bill. You and I have talked quite a bit about this, in particular about a personal friend of mine who’s done a lot of homework, Wendy Reinan, who I am sure is in Las Vegas. I just had a couple of points that I wanted you to clarify for me, and, perhaps, some other people watching and listening. I understand how insurance works. Insurance is actuarial based to spread out and use a system of assumptions, to spread risk, thereby being able to guarantee their financial liability that they carry.

I have two questions: First is a question that I hope you can answer that somebody just asked me this last week and is watching this proceeding. Why haven’t the two been commingled? It only makes sense that they would have been. Why weren’t they? The second question is actually in the bill under the explanation of what the act is, where it says, “the Board of the Public Employees’ Benefits Program to ensure that rates established for coverage for their programs of group insurance are the same for all participants.” So, the rates that people would be paying, is that a one-time rate establishment that would happen once they go into the two plans being put together, or is there going to be a difference in the rate the people would pay based on their personal health condition? Do you understand my question?

Assemblywoman Koivisto:

Yes, I do, and not being an insurance person, I’m kind of winging it here. When you are part of a group plan, all the members of the group are assessed the same premium; that’s why you’re in a group plan. If that’s wrong, I’m sure Mr. Thorne will let us know. But my understanding is that if you’re covered under a group plan, you have the same rate as everybody else in your class, in the group plan. A married couple, an employee and a spouse, will pay one rate, a single employee will have a different rate, an employee with children will have one rate, and an employee with spouse and children will have another rate. Does that make sense?

Assemblyman Christensen:

Yes, that answers my question. I guess we’ve all been reading e-mails from constituents about this issue. I just want to go on the record saying that it is a travesty that people have to choose between where they live, because their health insurance cost doubled, they have a 100 percent increase, paying rent or paying for their health coverage. Again, thank you for bringing this forth. Thank you, Mr. Chairman.

Chairman Manendo:

Thank you. Wendy Reinan faxed Mrs. Koivisto and myself some information, and that has been handed out to the members [Exhibit C]. Any other questions, Committee? Thank you very much. Mrs. Koivisto, do you have an order of anyone else that you want to come up and testify? Ms. Henderson.

Mary Henderson, Lobbyist and Government Consultant, Nevada League of Cities and Municipalities:

Thank you, Mr. Chairman, and members of the Committee. [Introduced herself] I can’t sit here this morning and tell you where our membership is, as a whole, on this bill. There about as many different views of this as there are local governments who are cities and GIDs [General Improvement Districts]. I can tell you this, we extremely appreciate the efforts of Assemblywoman Koivisto putting a human face on this and to try to bring this problem before this body so that we can work together to find some solutions.

I absolutely agree with her; this is not a numbers issue, though the numbers probably drive the solution, but it is a human issue. It is an issue of our retirees who spent many years working for us in local government. I don’t think any of us are heartless enough to say, “Be done with them, they made a choice and that is it.” I think what you are hearing from this is that we want to try to work with this body to find some solutions.

We’ve spent the last couple of days—and honestly, this is not a stall—we’ve spent the last couple of days scrambling to try to put some numbers together. And I think, just because we don’t have any numbers, it explains to me the complexity of this issue for all of us. We had a fiscal note that’s due tomorrow. I don’t think we could have even met that deadline, honestly, with the data that we have and some of the uncertainties of where our former employees are now, and what plans they’re in. We’ve tried to look at it, and without doubt, every local government—We’ve got HR [Human Resources] folks crunching numbers, we’ve got finance people crunching numbers. They can’t come up with a dollar figure that I can bring to you, with any degree of comfort this morning, to tell you what this impact is. What I would hope is that, over the next couple of weeks, we could work with the maker of the bill, and I think some other folks who are players in this, such as the school district, the counties, the Board itself, and try to put a dollar figure on this, and a dollar figure from the perspective of trying to determine what the impacts are.

I know what the personal impacts are to an individual retiree if they’re paying $1,500 a month, and that is huge. I’m a retiree, and I understand that. But I don’t know what those impacts are if they’re blended back into the pool to the whole base of current employees who are in that pool. I don’t know if it is $5 a year. I don’t know if it is $2,000 a year.

I think those are the kind of numbers that we need to have comfort with as we move toward this solution. There is a lot of data that we need to be able to obtain, as well. I know with the League of Cities, we’ve brought back in several folks into the league’s insurance plan. And when they came back in, we couldn’t even get the claims data to determine how to write them, because it just wasn’t existent coming back out of the public employee’s system. So, there are some concerns there.

The other piece of this for us is that there are as many different ways for a local government to look at this, as there are local governments. Some do contribute to their employees, some do not. Many of these retirement plans are negotiated. Assemblywoman Koivisto mentioned [the City of] Henderson, and that’s actually a negotiated item with their employees where they chose to take their money in salary, versus a contribution at retirement time. So now to bring them back into our system under an open enrollment is almost double-dipping, if you will. That doesn’t mean that we can’t find some ground in there, but there are those types of concerns.

There are also local governments who are partially contributing to this. I’ve heard from one local government who thinks that they actually may benefit from this bill because of the contributions they are making now toward their retirees. Again, the state is a little bit different from others without collective bargaining. Many of the jurisdictions have nine or ten bargaining units, as well as classes of employees who are exempt from collective bargaining where they are making—

It’s part of your compensation package actually, if you’re a division head or a manager, so to me the issue is extremely complex. At a minimum, we need to spend some solid time running numbers and getting a better understanding of who these employees are, these retirees, and what kind of dollar impact that’s going to have. Not only, if they’re commingled back in, into the state pool, but if they’re brought back into the local government pools, and get a much, much better sense of that before we could move forward in terms of endorsing the bill.

I do want to close with just saying that we do understand the problem, and we do have some folks down south who can answer any technical questions. This may not be the time to really get into that on this bill, but we want to partner with you, we want to partner with the maker of the bill, and we certainly appreciate the time she spent with us. The other thing that I want to say is that as far as I’m concerned—and I’ve been kicking around this business for a lot of years, and I’ve done budgets and those kinds of things—the local governments in this state, I’m going to talk about counties and cities, have done an extraordinarily good job of managing their employees’ benefits package.

What happens after an employee retires and chooses to opt out of that plan is a whole other thing that we’re dealing with today. But we have done an extraordinarily good job of managing those programs and those plans, and I want to make sure whatever solution we work toward doesn’t, in any way, affect the viability of the plans and the commitment that we have to our own employees. With that, I’d entertain any questions.

Chairman Manendo:

Questions, Committee? Thank you. I’m going to bring up Mr. Richardson.

James Richardson, Director, Judicial Studies Program, and Professor, Sociology and Judicial Studies, University of Nevada, Reno:

[Introduced himself] Representing the Nevada Faculty Alliance Chapters, and as some of you know, I chaired the precursor of the PEBP Board for a number of years, back in the 1980s.

I’d like to remind you of a little bit of history, explaining how we got here. There’s a little confusion, I think, about certain dates and when certain things happened, and hopefully, that will be clarified, soon, for all of us. I do know the driving issue that has, in a sense, brought us here, or at least one of them. There was, some years ago, a great interest expressed, particularly on the part of some smaller local government entities, in being allowed to come into the state health plan because they were having trouble getting coverage. So a decision was made by you, a policy decision I believe in 1985, to allow that. There’s a bit of a debate about exactly when the separate ratings started. I thought that it started then, and it may have started by regulation of the Committee. There’s a section of the bill that Woody tells me this morning, he thinks, appeared there in 1993, in the statutes, that would be exiled by this bill. Page 7 of the bill, down toward the bottom of the page, there’s statutory requirement that we do separate accounting for these retired persons that would be excised if this bill passes. So that was put in the statute, we think, in 1993.

When the interest developed to put local governments in the state health plan, you can imagine that state workers were a bit concerned. Some of the local governments had a bad experience and would bring problems to the state health plan. It had been a state health plan for state employees, actives, retirees, surviving spouses, and to many this looked like a potential problem. An effort was made to protect the state employees, and the idea was that state employees, actives, retirees, and surviving spouses should not have to bear the burden delivered to them by this change of public policy and see their own rates go up because of that. That’s really the historical background of this separate rating, the exact dates of when it went into statute may be finally found out fairly soon, but that’s the history and logic of it. I’ve always been in favor of allowing non-state entities into the state health plan, and indeed, was on the prevailing side of a number of two to three votes on the committee, back in the 1980s, on issues related to this. But I also felt compelled to argue in favor of issues that did protect state workers from seeing their own rates, potentially, sky-rocket because of that.

So with that little bit of background, I’d like to comment on this specific bill. I said in Ways and Means, on Monday, when they were hearing A.B. 165 and A.B. 222, that they actually needed to be hearing this bill at the same time, because this bill does more than either of the other two. This bill does relieve, if it is passed, the pressure on individual non-state participants in the state health plan. You wouldn’t have gotten all of those e-mails, calls, letters, and what not this year, if this bill had been passed last session, because the rates wouldn’t have gone up for those people. They couldn’t have, under this bill. So those people would be relieved, on an individual basis. But you do need to understand, and I think Woody will certainly verify this, where it says effect on the state, yes, that there is a hit on the state.

The same testimony that was germane when you heard A. B. 165 and A.B. 222 is applicable here, because indeed, if the commingling is done, it will impact the rates of state actives, retirees, surviving spouses, and what not. The percentage sounds small, I think Woody will tell you it is about 3.5 percent impact at this point, but it’s a large chunk of money, and it’s $5 million, approximately, since the PEBP Board did in fact approve a new plan. Starting July 1, they can cost-out the exact impact now, and I think they are in the process of doing that. Woody may have up-to-date information, but his best guesstimate that he’s been offered—I think in fact to this Committee—is that it is a $5 million hit against the state plan.

So, that raises the interesting question, this is concurrent referral, and so it ends up in Ways and Means. Anyway, it should have been there Monday, perhaps, but it’s not. It wasn’t, and so they’ll get to talk about it yet another time, and we’ll all get to testify another time on these issues. My question is where does that money come from? Is it an important enough piece of public policy that you would, in fact, ask the state actives and retirees to absorb the hit in a plan that is seriously deteriorated? It would be interesting for you, as a Committee, to have a look at just what the PEBP Board was forced to vote on last Friday, as a plan, and the deterioration that’s occurring in the state health plan. Already, in terms of benefits and much higher deductibles, even the basic plan that Marty briefly described for you, includes doubling the deductibles for all state employees, other plan cuts in benefits, along with the increases recommended by the Governor’s executive budget.

Obviously, this is not a happy circumstance we find ourselves in. I’m glad I’m not you, in a sense, but I do appreciate the effort. This will relieve one form of pressure. This bill will relieve the individual non-state people, particularly retirees and early retirees, from these extremely high costs, but you need to understand that those costs are simply being absorbed by the larger group of people in the pool, and their rates will go up, or their benefits will be cut, or a combination thereof. With that, I will close my testimony and be happy to answer any questions.

Chairman Manendo:

Thank you very much. We do have one question for sure. Mr. Goicoechea.

Assemblyman Goicoechea:

Thank you, Mr. Chairman. Mr. Richardson, I agree, a 3 percent hit would be very significant. We’re talking $5 million. However, we have to understand that in the 2001 Special [Legislative] Session there was an $18 million infusion into PEBP at that point. The previous session, I believe it was $28 million. It’s not like the system hasn’t been losing money, and if we’re going to talk about a $5 million shortfall, by commingling these, let’s bring it back to reality. PEBP has been receiving subsidies from the state government over the last, I believe, not three sessions, but four sessions, and I believe it was over $50 million that has been defused into the program. Isn’t that correct?

James Richardson:

I appreciate that question, actually, because it allows me to recount a bit of history. Four years ago, you, this Committee, participated in restructuring the program and establishing a new committee with broader representation. In fact, local governments now have a representative on the PEBP Board, and they didn’t for many years. They have a very good representative on the PEBP Board who is quite vocal in presenting the concerns of local governments. That restructuring and the funding that went with it worked rather well that first two years.

Regrettably, as usual, this state was in a financial difficulty when you came into the next session. The executive director at that time—it wasn’t Woody—had in fact a very happy report to give to the State Budget Office, and that is that, through the operation of the new PEBP Board and the funding that the state had received, there was about $20 million in their surplus. Now you know from previous testimony that you need more than that for this size of plan, but that was the report. A decision was made which I and the state representative argued against, fairly forcefully, in various money committees, to spend down the reserves. In the year 2001, in the face of 12 and 13 percent medical inflation throughout the country, and in Nevada, there was no increase in state subsidies for actives or retirees, in the year 2001. Really, what happened, in the special session, is the state had to pay that bill. They came up with $18 million for which all of us are very grateful. The plan would not be here today had that not happened, but we also might be in a slightly different circumstance if, as the PEBP Board had asked, the rates had been increased in 2001 to match medical inflation. They were not reserves or spent down, and we had yet another disaster that gets blamed on the Committee and on Woody, and the state had difficulties back then. I was in Ways and Means asking for money for various things, so I understood the difficulties, but the decision to spend down those reserves was a bad policy decision. We’re all bearing the brunt of it today, trying to get back up with our heads above surface.

Our Governor had made a valiant effort in the budget to deliver additional money, but the plan is still deteriorating, deductibles are going up, and all sorts of things. This hit, this additional hit, would be a serious problem to deal with, and it would be interesting when Woody testifies for him to talk about the specific rate increases that might be expected for state actives, retirees, and surviving spouses, if this bill passes without money. So I think the bill is a good bill. I think it is good public policy, but it needs some money attached to it to help deal with that problem and try to get the Public Employees’ Benefits Program truly solvent for the long term.

Assemblyman Goicoechea:

Just a follow up, if I may, Mr. Chairman? Yes, I agree with that, and the point I was trying to bring that the state, over the last at least four sessions, has brought money. So, I guess, the $5 million is fairly insignificant when you look at what’s been done over the last four sessions. Thank you.

Chairman Manendo:

Thank you. Mrs. Koivisto.

Assemblywoman Koivisto:

Thank you, Mr. Chair. Just a comment, perhaps clarification, “the happy report” that Mr. Richardson mentioned, was not based in truth, there wasn’t really, in actual fact, a reserve. There were pending claims that were not paid. Once those claims were paid, the plan was totally in the hole.

James Richardson:

May I comment on that? I appreciate that clarification, Assemblywoman Koivisto. It is true that we had other difficulties of management at that time, and the administrator was sitting on warehouses full of claims, and that may be one of the things that drove some bad policy decisions that the state budget office—in hindsight, we know more than we did then, so I appreciate your clarification—the state assumed we had $20 million in reserves when they really weren’t there. And so that dug a hole for us that we have not yet gotten out of. Thank you for that additional piece of information that I forgot to mention.

Chairman Manendo:

Thank you. Any other questions? Is there anybody in Las Vegas that needs to go on record now because they have to leave for any reason? [No response from Las Vegas]. Mr. Thorne, are you speaking?

P. Forrest “Woody” Thorne, Executive Officer, State of Nevada Public Employees’ Benefits Program:

Thank you, Mr. Chairman. [Introduced himself]. I want to start off by saying we appreciate the efforts by Mrs. Koivisto and this bill. Many of the items that were discussed by the PEBP Board in dealing with A.B. 222 and A.B. 165 have been reflected in here. We think that this bill goes a long way to leveling the playing field for all the participants, and that includes employers, employees, and retirees.

The concern remains on the fiscal note. How we deal with that, both short term and long term, is a concern of the Board. We’re looking at what was estimated a $5 million fiscal note on state participants or the state fund. The effect of pooling—what has been in the last year or two the much worse experience of the non-state group into the state group would have the effect of increasing the total rates for state participants, both active and retirees, by about 3.5 percent.

Now that the Board has made its decisions on what the plan design is going to be, starting July 1, 2003, we are working with our consultants to refine those and come up with the actual rates that would be in effect for all participants, if the commingling were to occur. So we’ll be able to report back to the Legislature on just what the exact impact would be. We’re very supportive of the concept of expanding the pool. We’re supportive of the concept of commingling because all of the employers, private sector and public sector, are facing the same problems with a growing retiree group relative to the number of activities. It’s going to be a problem that all of us are going to have to deal with in the near term and the longer term.

We’re dealing with a group of aging baby boomers, and unfortunately, I’m on the leading edge of that, so I can relate to the issues there. There’s a lot more coming behind. As those retire, it’s going to greatly expand the number of retirees relative to the number of actives. Many employers in the private sector are facing the elimination of retiree health care benefits and not providing enough of them at all. We certainly don’t want to see public employees in that kind of a situation, and we want to work with Mrs. Koivisto and others, who are attempting to resolve this situation to the benefit of all concerned.

We also wholeheartedly support the idea of the interim study. Marty mentioned the concept of pre-funding of retiree health care resources, and there are a number of methods that might be appropriate. There is certainly a discussion that needs to be in that long term study. The concept of a public employees and retirees benefit program where all public entities are in the program makes a lot of sense from an actuarial and underwriting standpoint. And that’s something that also should be explored. We do recognize that, as brought up by the League of Cities, with the collective bargaining issues and the multiple bargaining units that they have at the local level, the concept of commingling their groups is going to be extremely complex. And I’m not sure that can be done on the short term, but it should be a longer-term issue. When we get into that, we may end up with a public entity program that provides a base plan for all, and then negotiated differences are added onto that base plan. That may be a methodology for dealing with that local issue. I’ll be happy to answer any questions.

Chairman Manendo:

Thank you. Mrs. Koivisto.

Assemblywoman Koivisto:

Thank you, and thank you, Mr. Thorne. Can you tell me if consideration has been given to getting away from this self-funded plan and going to an insurance based plan, like with Anthem Blue Cross, or somebody?