Simple suggestion could save state as much as $470 million

Michael McGhee worked for a month on an idea about how to save money for Nevada. The lifelong Nevadan showed up at 9 a.m. for a legislative meeting Thursday and waited patiently until public comment began at 4 p.m.

When 18 people rushed forward for their chance to speak for three minutes, some spoke in generalities, a few rambled pointlessly, a few made suggestions that were never going to fly. (Does anybody really think charging teenagers $500 for their driver's licenses is fair?)

But McGhee offered a specific idea, an idea that seemed relatively simple, an idea intriguing enough that Assemblyman Joe Hardy, R-Boulder City, rushed after McGhee to ask questions.

McGhee, at one time director of administrative computing at UNLV, suggested Interim Finance Committee members consider looking at suspending the match the state provides for retirement benefits.

The state pays 10.5 percent of employees' salaries into their retirement accounts. "It's a fairly generous benefit," said McGhee, now a co-owner of Anexeon, a technology provider company, which like many companies, provides no match to its employee retirement account.

While my own company matches a portion of what I pay into my 401(k) retirement plan, many private companies have suspended the matching contributions they made to employees' retirement accounts. If it prevents layoffs, I'm sure many workers willingly accept the benefit reduction as the lesser pain.

McGhee's point is that there is no reduction in take-home pay. The employees can still save whatever they choose. The savings to the state would be immediate and significant, particularly if it could be applied to all state and local government employees, although that's not certain.

According to his calculations, suspending the match entirely for all state and local government workers could save as much as $470 million over the current two-year budget, a budget lawmakers are trying to reduce by $887 million.

An enthusiastic Hardy was certainly willing to consider it and said this was the first time he'd heard this proposed, and he's a member of the Interim Finance Committee and Assembly Ways and Means.

"It's not a new idea, it's being looked at," said Jane Nichols, vice chancellor with the Nevada System of Higher Education. "The challenge is the assumption to believe we can make it up later."

Actually, McGhee doesn't intend the losses be made up later, but that the retirement benefit be resumed later, preferably at a lower rate, one more comparable to private industry. (Since higher education professionals sign annual contracts every May, now would be the time to change those contracts, McGhee said.)

In that case, Nichols said professional staff would perceive it as a pay cut and it would add one more burden to recruiting top tier professionals.

Although the idea could work in higher education, where professional employees are covered under a separate and portable plan independent from PERS, it probably can't work for state and county employees covered by the Public Employees Retirement System, where there are defined benefits, according to Executive Director Dana Bilyeu.

The Nevada Supreme Court has ruled that the laws governing PERS constitute a contract. McGhee argued that could be changed if lawmakers had the political will.

McGhee isn't the only person who calls me with suggestions about how to help solve the budget crisis. He's neither a politician nor a government worker defending his turf. He's just trying to help in the old-fashioned American way, by coming up with an idea and trying to get the powers that be to listen.

Jane Ann Morrison's column appears Monday, Thursday and Saturday. E-mail her at Jane@reviewjournal.com or call (702) 383-0275. She also blogs at lvrj.com/blogs/morrison.