Editorial: Government retiree costs must be reined in

The PERS cost creep continues.

According to TransparentNevada, a website maintained by the Nevada Policy Research Institute, the number of former Nevada government employees drawing pensions in excess of $100,000 a year from the Nevada Public Employees’ Retirement System now exceeds 2,150. In 2013, when pension data were first made available the number was 1,000.

To pay for these lucrative pensions, starting in July the regular PERS members — teachers and other government workers — saw the amount of each paycheck that must be paid into the pension account increase from 28 percent to 29.25 percent. Half of that amount comes from the worker and half from the taxpayers. It is all taxpayer money to begin with.

Police and firefighters, who tend to have shorter careers, now must chip in 42.5 percent of their salaries, up from 40.5 percent. Again, half from the employer.

Despite these increases in contributions, PERS still will have a huge unfunded liability — more than $40 billion if you use generally accepted accounting principles.

According to Robert Fellner, NPRI’s policy director, all of the contribution hikes that have occurred over the past decade have gone towards paying down PERS’ debt rather than covering the pension checks for future retirees. “The debt component is now so large that 45 percent of what Nevada teachers will pay to PERS next year will go towards funding other people’s retirement, rather than their own, future benefit,” Fellner wrote earlier this year.

Fellner calculates the cost of funding other people’s retirement checks will cost the average teacher $7,680 this year.

Efforts to reform PERS over the years have gone nowhere. Perhaps because lawmakers themselves are members of the PERS racket.

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.

PERS benefits have ratcheted up over the decades by virtue of incremental benefit increases, collective bargaining gains, earlier retirement age, allowing the purchase of years of service, padding base pay with add-ons such as callback, standby, holiday, shift differential, extra duty, hazard and longevity pay, and simple compound interest.

According to the American Enterprise Institute, the average Nevada public employee pension is $64,000 a year or $1.3 million in average lifetime benefits, the highest in the nation. Meanwhile, the average Social Security annual benefit is $16,000.

It is long past time that the state change this 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.

A bill to do this was introduced in the 2013 legislative session. Though it would have applied to future retirees only, the bill garnered no discussion and no vote was ever taken. It died without a whimper.

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.