We knew Nevada’s public employees had generous pension benefits, but now a researcher at the American Enterprise Institute has done the calculations and found Nevada’s public pensions are the richest in the nation — $64,000 a year or more than $1.3 million in lifetime benefits. That doesn’t include public-safety workers, such firefighters and police, who can retire earlier and generally have higher salaries, especially in Nevada.
Compare this to the average annual Social Security benefit of $14,220.
Andrew Biggs, a resident scholar at the AEI, calculated what those retiring in 2011 and 2012 from public employment would be paid as pensions based on the pay and benefits in each state. TransparentNevada has posted what current retirees in Nevada are being paid in benefits.
“Just as annual public pension benefits vary by state, so do lifetime benefits,” Biggs writes. “The most-generous benefits are paid in Nevada, where the average full-career employee will receive more than $1.3 million in pension benefits over the course of his retirement. In the four next most-generous states — Alaska, California, Colorado, and Oregon — lifetime benefits exceed $1.2 million. A wealthy, high-cost state such as Connecticut offers a typical full-career employee more than $1 million in lifetime benefits, but so does a relatively low-cost state such as West Virginia.”
Biggs recommends that states switch from defined-benefit plans to defined contribution plans, similar to 401(k) plans, which has been called for but ignored in Nevada for years. He also suggests that government pensions should be calculated based on career earnings rather than final wages. “Social Security already does this, using adjustments to account for inflation and the growth of wages over time,” Biggs says.
Biggs fails to mention that some public employees can get a spike in salary in their final years to boost their pension payouts, as A.D. Hopkins reported in 2009 about Clark County firefighters.
“Public employees are likely more risk averse than private-sector workers and so may desire a different and less risky type of pension. Likewise, governments may find that different pension structures better suit their needs in attracting and retaining employees. But different pensions for public employees need not imply public pensions that are many times more generous than those paid to the private-sector workers whose taxes keep public plans running.
“Many public plans have already instituted lower benefits for new hires, and more are considering such reforms. But it would be rare to find any full-career public employee who would receive a more generous pension in a private-sector job. Public employees should be willing to accept—and private-sector workers to demand—more equity in the generosity of their pension plans.”