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.

14 comments on “Editorial: Government retiree costs must be reined in

  1. Rincon says:

    I wouldn’t get too bent out of shape about it. According to the Economic Policy Institute, which Mediabiasfactcheck rates as high for factual reporting, although they do have a left center bias:

    “All told, it is likely that state employees in Nevada receive benefits that are less generous than average for state and local government workers, factoring in the lack of Social Security coverage and relatively modest retiree health benefits. Therefore, their total compensation is lower than that of comparable private-sector workers in Nevada, especially those working for large employers who tend to provide more generous benefits, and the public-sector compensation gap is probably larger than the gap we have estimated using national benefit cost estimates.”

    “Adjusted for education, the pay of state employees in Nevada is 10 percent lower on average than that of private-sector workers, despite the fact that state employees are somewhat older and more experienced. Although public-sector workers typically receive more generous employer-provided benefits, Nevada state government employees do not receive Social Security coverage and the employee share of pension payments is unusually high. Therefore, the available evidence suggests that Nevada state employee benefits do not make up for the lower pay (as discussed in more detail below).
    State government employees make up a smaller share of the workforce in Nevada (3.5 percent) than they do in the United States as a whole (4.7 percent). The federal and local government shares of the workforce in Nevada are also smaller than average. State employees in Nevada are paid about the same as the national average for state government employees ($57,818 in Nevada vs. $58,365 for the United States).
    Nevada state employees—unlike many state and local government workers—do not participate in Social Security. For this reason, BLS statistics on government employee benefits probably overstate the cost of these benefits in Nevada, since the employer’s share of Social Security contributions is normally 6.2 percent of pay. The Nevada state employee pension does replace a somewhat higher share of salary than the pensions of many other public-sector workers across the country, but the difference is not enough to make up for the lack of Social Security coverage.
    Nevada state employees also contribute much more toward their pensions than the typical state or local government employee nationwide. Most Nevada state employees contribute half of the total cost of the pension, much of which goes toward paying legacy costs associated with past workers. This means that the amount they contribute effectively covers most of the cost of their own pensions.


  2. From a 2017 report by the Nevada Department of Employment, Training and Rehabilitation, local government workers average $1,130 a week in wages, while state workers average $1,093 and the private sector taxpayers average only $922 a week.

  3. The EPI report does not use data based on Nevada state workers but, instead, uses regional data for all Western states.

    When you use data for Nevada state workers, as reported by the federal Bureau of Economic Analysis and the Federal Reserve Board, it shows that:

    At 49 percent greater than the average private-sector worker, compensation for Nevada state workers ranked 2nd highest nationwide.

    Click to access Nevada-Collective-Bargaining.pdf

  4. Steve says:

    See page 1 for the latest overall info (2016)

    Click to access 2016%20E%20and%20P%20Final.pdf

    Here is the 2017 release from Nevada. It covers only private sector wages.

    Click to access Current%20Release.pdf

    As we can see from official state data, EPI’s data is somewhat misleading as they focus on state employee wages only. Local public wages have always been much higher than state pay and all Nevada public employees are in PERS.

  5. […] 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. […]

  6. Rincon says:

    Here we go again. EPI and NPRI’s figures differ, so why? As I had mentioned, EPI’s reporting was rated as highly factual by mediabiasfactcheck, while NPRI is funded in part by none other than the Koch brothers. Lemme see here….which one should I trust? https://www.sourcewatch.org/index.php/Nevada_Policy_Research_Institute#Funding

    Your comment about PERS being for state and local workers is well taken, Steve. Is it possible that cities in Clark County pay better than those in Bumblefarkel? Since the Las Vegas metropolitan area contains 75% of the population of Nevada, comparing the average pay of local government workers to that of say, Nebraska would be comparing apples and oranges.

  7. Steve says:

    Not talking about any other state than Nevada, Rincon.
    Nevada PERS is the topic here.

    I posted links to official State Of Nevada sources, Rincon. How about, instead of insisting EPI infallible, you peruse the Nevada’s own data and see for yourself? I think you will find the answer (as usual) is not found in the extremes.

    I happen to believe NVPERS investment strategy will pay off and cover promised benefits. Others insist the benefits are unfunded liabilities. In any case, same as Social Security, benefits are at the whim of legislative action and can be changed at any time.

  8. Rincon says:

    Funny, I was talking about Nevada too. Small world.

  9. Steve says:

    Yeah…with a strong lean on EPI who include all the western states (while discluding local and city stats) in their data.

    So, how about those Nevada only links I provided….what say you, Rincon?

  10. Rincon says:

    The title of my link was, “Nevada State Employee Fact Sheet”. So somehow, this includes, “all the western states”?
    My previous comment: “Your comment about PERS being for state and local workers is well taken,” noted the inclusion of local and city (which, I think, IS local) data. You simply didn’t like my possible explanation. So be it.

  11. Steve says:

    No…sigh….no, Rincon.
    You don’t like the actual state of Nevada site proves EPI factually omits facts which leads them to conclude something you DO like.
    It is still, however, incorrect.

    Look at the EPI end notes and citations. They used a lot of data to avoid using Nevada state data.

    Call it what you want, you don’t like the reality Nevada showed you, you much prefer the bias EPI expressed in their highly factual very narrow conclusion.

  12. Rincon says:

    No sighs needed, thank you.

    One of your links merely compares average wages in the public and private sector, but they are not matched by jobs or education. Especially in Nevada, with a large tourist industry providing lots of low paying private sector jobs, this appears to be rather meaningless in our context. The EPI report claims to be adjusted for education. I believe that to be much closer to an apples to apples comparison. Nevertheless, I want to thank you for pointing me to page 1. It’s a 72 page report. Might have been a little tricky otherwise.

    So far as I can tell, your other link shows that Nevada workers (presumably government and private combined) received about $800/week in 2007 vs 900 in 2017. I’m don’t perceive a relevant conclusion. Am I missing something?

  13. Anonymous says:

    “meaningless in our context” Nope. The “context” is the average of all employees in Nevada no matter what level of education.
    See the chart on page 1 again, the lowest average is private sector wage. (period)

    The other link is the only 2017 data released by Nevada, therefore it must be the report Mitch referred to in his comment.

  14. Steve says:

    I bumped the enter key….

    I reiterate:
    I believe NVPERS investment strategy will cover the “unfunded liabilities” so worrisome to people who do not appear to understand how such investing works when being used to pay out in retirement.
    They sell only as needed to cover obligations and remain invested with the lions share for the long term. This is the same as I will do in my retirement. Though one other incentive exists to keep me invested…the IRS. You see, if I were to take the whole of my investments out at once, I would be taxed on them all at once and at the highest rate as well. If I take only what I need, I am taxed only on what I take over the course of the year. With an IRA you are taxed only once cash is distributed and with a spending/investment account, you are taxed only when you sell at a profit. (if you exceed the standard deduction) It’s complex, but simple. Take distributions and sell investments only when needed.
    This is what NVPERS does and it works, will continue to work and has always worked.
    The “unfunded liability” is the future value of the invested portion of NVPERS investment assets.

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