Editorial: PERS reform needed to curb ever higher costs

The PERS cost creep continues.

Earlier this month the board of directors of the Nevada Public Employees’ Retirement System authorized an increase in the amount state and local public employees and their employers — read: taxpayers — must contribute to cover pension costs.

That means, starting next July 1, for regular PERS members — teachers and other government workers — the amount of each paycheck that must be paid into the pension account will increase from 28 percent to 29.25 percent. Half of that amount comes from the worker and half from the taxpayers. Since the average public employee salary should be almost $53,000 a year by then, each worker would need to kick in on average another $330 or so a year to be matched from tax funds. (November 2018-Board Book)

Police and firefighters, who tend to have shorter careers, are assessed a higher amount. Their contributions will increase from 40.5 percent to 42.5 percent. Since the average pay should be more than $79,000 that means an almost $800 increase to be chipped in by each cop and firefighter, also matched with tax money. 

Expect those government workers to bemoan the pay check cut — even though their benefits contributions are being increased — and run crying to the Legislature to demand more money. 

The Nevada government worker retirement system, unlike anything found in the private sector, is based on a defined benefit plan, meaning pensions are calculated as a percentage of the highest pay the worker receives at the end of his or her career times the number of years worked. 

According to the American Enterprise Institute, the average Nevada public employee pension is $64,000 a year, while the average Social Security annual benefit is $16,000. Nevada Policy Research Institute has posted at its TransparentNevada.com website a list of pensions paid in 2015. This includes more than 1,500 public employee pensioners drawing more than $100,000 a year.

The cost of these pensions have skyrocketed over the years.

Victor Joecks, a columnist for the Las Vegas newspaper, points out, “Nevada has been increasing contribution rates for decades to pay off unfunded pension liabilities. When PERS started in 1948, the contribution rate was 10 percent for all employees on their first $400 in earnings. In 2003, it was 18.75 percent for regular employees and 28.5 percent for police and fire. Next year’s rates are 56 percent higher for regular employees and a 49 percent increase for police and fire compared to 2003.”

Joecks calculates that if teachers contributed at the same rate they did in 2003 their take-home pay would be $2,800 more a year.

The system has an unfunded liability of more than $40 billion when one uses generally accepted accounting principles. That’s more than $53,000 per Nevada household.

It 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 corporations. The worker and the employer each contribute a set amount of the salary and the money is invested until the worker cashes out.

There actually was a bill introduced in the 2013 legislative session that would have done this. The bill garnered no discussion and no vote was ever taken. It died without a whimper in the Assembly Ways and Means Committee.

One day the PERS balloon will burst. We call on lawmakers to act now.

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

One comment on “Editorial: PERS reform needed to curb ever higher costs

  1. Rincon says:

    When you say average Nevada public employee pension is $64,000 a year, while the average Social Security annual benefit is $16,000, are you saying that public employees should be able to live of $16,000 a year, and therefore deserve no more, or are you saying that Social Security should be closer to the $64,000 figure so that people don’t live their later years in poverty?

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