Editorial: Lawmakers must reform public employee retirement system

Most of the blather coming out of Carson City this legislative session has been about the various means that can be employed to tap more tax revenue from the citizens. But finally someone has introduced a bill that would curb the state’s profligate spending.

This past week Republican Assemblyman Randy Kirner of Reno introduced Assembly Bill 190, which calls for reforming the Nevada Public Employees’ Retirement System (PERS), which under government voodoo accounting methods has an unfunded liability of $12.5 billion, but under the accounting methods the rest of us must use the liability is actually more than $40 billion — nearly $15,000 per capita and growing.

The changes Kirner proposes would apply to state and local government workers hired after July 1, 2016, leaving unchanged the benefits promised to current employees and retirees. “The bill protects people that are in PERS today,” Kirner told reporters. “A promise made is a promise kept.”

Currently the system is a 100 percent defined benefit program, in which the retirement benefit is calculated based on years of service and level of pay of the employee at retirement, regardless of the state of the economy.

Randy Kirner

AB190 would introduce a hybrid — part defined benefit, part defined contribution. A defined contribution plan is similar to the 401(k) programs used primarily by the private sector. Under this system typically a certain percent of the employee’s salary is invested in something like a mutual fund and the retiree benefit depends on the amount contributed and how well the investments perform. The taxpayer has no obligation to make up any difference on that part of a hybrid retirement plan. Defined contribution plans are also are more easily portable to another job or retirement system.

Kirner’s bill also would end the practice of allowing government workers to purchase up to five years of retirement credit and retire at 70 percent of highest pay after only 25 years on the job.

The bill also ties the minimum retirement age for receiving full benefits to that allowed under the Social Security Act, meaning retirees would collect full benefits for far fewer years, in many cases decades fewer. Police officers and firefighters would be able to retire with full benefits 10 years earlier.

Further, the bill requires a certain level of contributions toward retirement to come from both the employer and the employee. It bars public employee unions from using collective bargaining to increase the amount of contribution from the employer, a practice that over years has allowed some government workers to contribute nothing in lieu of higher raises.

Currently, according to research conducted at the American Enterprise Institute, Nevada full-career PERS retirees fetch the most generous retirement checks of any state in the union — $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.

In comparison, the average Social Security recipient gets $15,500 a year after being on the job decades longer.

In the 2013 legislative session Kirner introduced a very similar bill. It garnered no discussion and no vote was taken in the Democrat-controlled session. Assembly Bill 342 died without a whimper in the Assembly Ways and Means Committee. Whether it will fare any better under a Republican-controlled Legislature remains to be seen.

We call on Nevada’s lawmakers to give AB190 a fair hearing and give taxpayers a break, while treating public employees in a manner similar to those in the private sector. In fact, we would suggest that future public employees could simply be enrolled in Social Security.

A version of this editorial appears this week in the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel and the Lincoln County Record.

9 comments on “Editorial: Lawmakers must reform public employee retirement system

  1. Steve says:

    Instead of enrolling public workers in social security…I say make PERS available to all Nevada residents.

  2. Bill Conrad says:

    You absolutely need defined benefits or cities will flat run out of money. It is not good when the public sector especial interest employee groups can control city and state governments. The end result is fiscal disaster.

  3. Barbara says:

    In addition to PERS reform, the practice of accumulating sick time and vacation time and cashing out huge checks at retirement needs to be done away with. What private employer allows is able to pay thousands of dollars for unused sick and vacation time.

  4. That chart is a real eye opener…let’s hope the State Senate & Assembly are paying attention.

  5. […] bill to reform public employee pensions was put off till next session, by when the unfunded liability will have grown even […]

  6. […] The solution is for Nevada to change to a defined contribution plan — comparable to 401(k) plans used in private industry — for future hires. The employer and employee would each contribute to a fund that would be invested, leaving the taxpayers off the hook should the economy turn sour. This has been offered and rejected. […]

  7. […] a 2015 editorial in Battle Born Media newspapers called for pension reform. It backed Reno Republican Assemblyman Randy Kirner’s Assembly […]

  8. […] 2015 Reno Republican Assemblyman Randy Kirner introduced Assembly Bill 190, which called for reforming PERS, which at the time was costing nearly $15,000 per Nevadan per year […]

  9. […] is long past time that the state change its ever more costly pension program from the defined-benefit plan to a defined-contribution plan, similar to the 401(k) plans used by […]

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