By Mark Waite
A report presented to Nye County commissioners May 1 estimated the actuarial accrued liability of the county’s post retirement medical plan as of June 1, 2010 was $48.83 million, of which none has been funded.
A representative of Hay Group Inc., which prepared the report, in an interview with the Pahrump Valley Times on background, compared it to a parent budgeting the cost of their children’s future college education while they were still in elementary school. Almost no government entities are doing that, outside of the U.S. Postal Service.
Consultants recommended Nye County contribute $3.64 million annually on a pay-as-you-go basis for the cost of providing retiree health care benefits for fiscal year 2011. They reported the county is expected to contribute $1.14 million. The recommended annual contribution is the normal cost of one year of liability, about $2.01 million, plus amortization over 30 years of the cost of the unfunded liability.
Nye County employees may receive health care coverage for life. The county has 480 active employees receiving medical coverage and 182 retirees, according to the report.
The company assumes health care costs increased by 6.54 percent last year, but will decrease over 70 years to 4.2 percent. A consultant said costs could go down with health care reform.
New regulations by the Governmental Accounting Standards Board GASB requires employers to anticipate future health care costs by adjusting today’s health care costs with projected health care trend rates.
The county pays a premium with no reduction for former employees covered by Medicare. The gross premium paid by the county for using a preferred provider is $579.69 per month for an employee, or $1,558.20 for an employee with a family.
The liability has emerged as a campaign issue raised by District 2 commission candidate Garren Hesketh in appearances at local forums.
“I have a Masters in Business Administration. I’ve been a Department of the Defense inspector general. I understand finance and I’m not happy with what our commissioners have done with finance in the last 12 years. We’re kicking the can down the road. We have an unfunded obligation of $48 million for the employees future health benefits and other benefits. We spend 77 percent of what’s collected to pay salaries, wages and benefits. We cannot continue to operate that way,” Hesketh said during an appearance at the Artesia Community Center last Tuesday.
He also referred to comments by county accountant Dan McArthur, in the annual audit report, that it would take 28 years to pay off the unfunded actuarial accrued liability.
Hesketh warned county revenues will start to drop, while the cost of employee salaries will rise. The county needs to do something, like getting concessions from the employees, he said.
Nye County Commissioner Joni Eastley said laws on benefits under the Public Employee Retirement System are set by the state.
“How are we supposed to address that when the PERS laws are set by the Legislature? If he believes the county has a $48 million liability in terms of future retirement benefits, he should address it to the Legislature,” Eastley said.
At the May 1 meeting, Commissioner Dan Schinhofen noted a previous article in a Pahrump newspaper that stated County Manager Pam Webster would receive medical benefits for life with her recent promotion from assistant county manager.
“This is pretty much something we do for the employees, they get health care after they retire?” Schinhofen asked.
Eastley replied it’s part of the settlement with the employees collective bargaining unit, providing employees meet certain criteria.
“So you’re not getting anything anybody else isn’t getting, right Pam?” Eastley asked.
After some hesitation, Webster replied, “true.”
Nye County Human Resources Director Donelle Shamrell said the purpose of the report is to document the county’s post retirement liability. It’s now required every two years by the new accounting standards.
“This is an actuarial report to notify you of potential future liability. We have chosen as a county to budget and pay as we go. We do not have any liability provisions set up for this future obligation. I just want you to understand that as you approve this,” Webster said.
“Is this the best way to go?” Schinhofen asked.
Webster joked, “The best way to go is to have this all reserved on your books. I mean I would love to have that, in a world of a budget that’s not continuing to go down.”
Webster didn’t respond to a phone call for a follow-up interview.
Nye County Comptroller Susan Paprocki told the Pahrump Valley Times she has been busy preparing the final budget and hasn’t yet had time to review the report to determine if it is a serious situation down the road.
“I believe if it was an issue it was an issue that would’ve been brought to the commissioners’ attention during the audit,” Paprocki said.