It’s rare for elected officials to act in order to avoid fiscal problems years in the future. But as Henderson showed, it can be done.
Last week, the Henderson City Council voted to eliminate a subsidy for retiree health insurance premiums. Previously, a program called Retirement Health Insurance Premium Assistance gave retirees a monthly subsidy of between $200 and $500. But the fund was going to run out of money in the future. So the council replaced it with spruced up Retirement Health Savings accounts. The change affects employees represented by the Henderson Police Officers Association, the Henderson Police Supervisors Association and Henderson Professional Firefighters Local 1883. Each union signed off on the amended agreements, which is to their credit.
Anyone who follows retirement programs could outline the problems. The promised benefits cost more than expected. Officials initially attempt to cover the shortfall by raising the contributions of current employees. Then comes the decision-point for those in charge: Bite the bullet and scale back the program or punt the decision to future elected officials?
The latter option is too often the default setting. Not this time. “The further we kick the can down the road, the longer it takes to make a decision,” Henderson Mayor Michelle Romero said. “It’s going to make the problem worse and worse.”
She’s right, and that represented refreshing leadership. The political incentives ran in the opposite direction, especially as the mayor is running for re-election. Voting to scale back a promised benefit inevitably angers those who were promised the benefit. That happened here.
Rather than direct their wrath at past elected officials who misled them, those who were promised the benefit attack those currently in office. The retirees or soon-to-be retirees sometimes mistakenly believe they are simply getting what they put in. That’s rarely the case. Programs such as these have shortfalls because benefits are overly generous not because the are miserly.
Taxpayers are supposed to provide the counterweight when benefits are negotiated. But the cost of an unaffordable program is dispersed over a much larger group than those who stand to benefit. This is why unions have outsized influence in contract negotiations. Also, most taxpayers don’t pay attention to the nuances of public-sector retirement benefits. They generally assume that state and local politicians wouldn’t create a benefit requiring subsidies from future taxpayers.
Henderson’s actions showed admirable concern for the city’s fiscal health. State legislators should take heed and find similar courage to reform the Public Employees’ Retirement System of Nevada.
