We already knew Nevada’s state and local government employees have 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 as firefighters and police, who can retire earlier and generally have higher salaries, especially in Nevada.
But that is comparing public sector to public sector by state.
How do Nevada public sector employees’ pay and benefits stack up against the private sector?
Former Clark County manager Thom Reilly, now a professor at San Diego State University, recently studied the lifetime compensation of a private sector secretary or administrative assistant compared to that of a Nevada public employee with the same job, in which both are just now retiring. He found that when you add the lifetime salary and the total retirement benefits, the public employee is paid 85 percent more — about $1.13 million more.
Both Reilly and Andrew Biggs, a resident scholar at the AEI who calculated those state by state comparisons, warn of major consequences to taxpayers from rich retirement obligations.
“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.
Biggs also suggests that government pensions should be calculated based on career earnings rather than final wages at retirement. “Social Security already does this, using adjustments to account for inflation and the growth of wages over time,” Biggs says.
“Many public plans have already instituted lower benefits for new hires, and more are considering such reforms,” the researcher continues. “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.”
In the 2013 legislative session Reno Republican Assemblyman Randy Kirner introduced a bill that would have modestly reformed public employee pensions. The bill garnered no discussion and no vote was taken. Assembly Bill 342 died without a whimper in the Assembly Ways and Means Committee.
Among the solutions Reilly recommends in his book — “Rethinking Public Sector Compensation: What Ever Happened to the Public Interest?” — is: “First and foremost, people need to work longer and the retirement age should be raised. … Public sector employees should not be retiring earlier than private sector ones.”