Editorial: Window on government employee pensions is eye-opening

The Nevada Policy Research Institute has updated its popular transparentnevada.com website, which reports the names and salaries of state and local government employees, with 2015 data.

While the salary data is significant information for taxpayers who want to make sure we are getting our money’s worth, it may be the benefits, particularly retirement benefits, that warrant greatest scrutiny.

Yes, according to Nevada’s own employment records state and local government employees are paid about $10,000 more a year in wages than those in the private sector, but taxpayer-funded pensions for those workers in the Nevada Public Employees’ Retirement System known as PERS, are the richest in the nation, according to research conducted by the American Enterprise Institute.

Robert Fellner, director of transparency research at NPRI, points out in a press release announcing the update at transparentnevada.com that, while the median private employer spends 3 percent of pay on their employees’ retirement accounts, Nevada taxpayers contribute 28 percent of each state and local government employee’s salary toward pensions and 40 percent for police and fire.

“Nevadans can expect higher taxes or service cuts if they are forced to continue paying for retirement benefits that are nearly ten times richer than what they themselves are likely to receive,” Fellner writes. “In 2013 — the most recent year data was available — Nevada’s local governments spent a national-high 9.6 percent of direct general expenditures on retirement costs, nearly quadruple the 2.5 percent national average.”

The government pension program has an unfunded liability of $40 billion.

Fellner’s research turned up one example of just how daunting it is for the average taxpayer to unravel the lucrative pension formula.

A Clark County police officer who retired in 2015 with 30 years on the job was eligible to receive 78 percent of his salary as an annual pension, which would have been $92,000 since his salary was $118,000. Instead, he is scheduled to receive $172,000 a year for life.

This is because PERS, as Fellner explains, counts as salary a variety of additional pay, such as call-back pay, as well as part of the government’s pension contribution, which seems like double dipping.

According to transparentnevada.com, in 2014 there were more than 1,000 Nevada state and local retirees receiving annual pensions in excess of $100,000.

American Enterprise Institute found Nevada full-career PERS retirees fetch the most generous retirement checks of any state in the union — $64,000 a year on average or more than $1.3 million in lifetime benefits. That doesn’t include police and firefighters, 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 a report published during the 2015 legislative session, NPRI’s Fellner wrote, “Over the past 20 years, the amount Nevada taxpayers contribute toward public employee retirements has skyrocketed — from $384 million in 1995 to $1.4 billion today. That’s an increase of more than 50 percent after adjusting for both inflation and membership growth.”

During that session there was a bill pending to rein in this growth in public employee pension cost.

The bill — Assembly Bill 190 — would have changed the current system from 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, to 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 in which a portion of the salary is invested in something like a mutual fund. The amount of the pension depends on how well the investment does and relieves the taxpayer from having to cover any shortfall.

It would not have affected the pensions of current employees and only applied to those hired in the future.

Of course, it died in committee without ever being voted on.

Transparency is good, even when what you are seeing is so eye-opening.

A version of this editorial appeared this past week in many 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. It ran as a column in the Elko Daily Free Press.

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.