How Nevada provides a disincentive for experienced teachers and other employees to continue working

Once again the folks at the Nevada Policy Research Institute have put out a jeremiad lamenting the state’s self-defeating, tax-draining, counter-productive public employee retirement system.

The opinion section of the Sunday newspaper carries an op-ed by Robert Fellner, director of transparency research at NPRI, that points out that the Public Employees’ Retirement System of Nevada provides a powerful disincentive for experienced teachers, school administrators and other public workers to continue working and providing services to taxpayers.

Thinkstock graphic posted with Fellner op-ed online.

For example, if Clark County Schools Superintendent Pat Skorkowsky were to continue working to age 60 — instead of retiring next year at age 53 after 30 years on the job as announced — he would forfeit approximately $1.5 million in PERS payments. The same principle, though lesser amounts, applies to our most experienced classroom teachers, leaving Nevada’s youth, who already trail nearly every other state in educational achievement, in the hands of less experienced instructors.

Feller points out that if the state were to opt for a 401(k)-style retirement plan — as in the private sector — there would be an incentive to continue working because retirement benefits would grow every year instead of reaching a maximum after 30 years.

This is something we have been advocating for years. While various proposals have been floated, all have been sunk by the entrenched public employee unions.

In 2011 a report drafted for the NPRI by Andrew Biggs, an economist with the American Enterprise Institute, concluded the Nevada Public Employees’ Retirement System is vastly underfunded by more than $40 billion.

“What people don’t realize,” Biggs said to a luncheon audience back then, “is your typical public sector pension plan is a lot more generous than what a typical person is going to get in the private sector. Let’s just take a person and run their wages through what they would get from PERS versus what they could get from a typical 401(k) plan combined with Social Security, because public employees here don’t participate in Social Security. They both pay the same amount on average. The total contribution is about the same, but the benefits for someone under PERS — for a full career employee — is somewhere around 50 percent higher.”

A year ago Fellner penned for NPRI “Footprints: How NVPERS, step by step, made Nevada government employees some of the nation’s richest.”

Fellner warned that “should today’s international no-growth economy stumble into the deep financial crisis that many forecasters fear, NVPERS’ fantasy economic forecasts will be replaced by immediate bankruptcy — leaving every Silver State household with a sudden, implicit, $50,000-plus tax liability.”

The report detailed how NVPERS 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.

Fellner noted that local government employees have taken advantage of their collective bargaining union contracts and negotiated to have their employers actually pay the employees’ pension contribution, claiming this is done in lieu of a salary increase or in conjunction with a salary decrease — even though local government pay checks rank eighth highest in the nation.

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.”

 

The giant sucking sound is drowned out by the chirping crickets.

 

 

 

 

 

 

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Editorial: Another public pension warning flag raised

Researchers at the Mercatus Center at George Mason University have published their annual “Ranking the States by Fiscal Condition,” and Nevada ranked a respectable 14th among the states in overall fiscal health and accountability.

The study ranked each state based on short- and long-term debt and other obligations, such as unfunded pensions.

The unfunded pension debt is where the warning flag was raised.

“Nevada’s trust fund solvency is ranked among the lowest in the country,” the report states, ranking Nevada 45th in the nation, down from 44th a year ago. “Unfunded pension obligations, on a guaranteed-to-be-paid basis, are $65.87 billion, or 54 percent of state personal income.”

That underfunded obligation amounts to $86,500 per household in Nevada.

Were the economy to hit another bump, Nevada taxpayers would be on the hook for writing pension checks that are the richest in the nation, according to the American Enterprise Institute.

AEI found that the average Nevada Public Employees’ Retirement System (PERS) pension is drawing — $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, especially in Nevada.

The average Social Security annual benefit is $16,320.

Nevada Policy Research Institute has posted at its TransparentNevada.com website the pensions paid in 2015, which lists more than 1,500 public employee pensioners drawing more than $100,000 a year.

For years we have called for public employee pension reform, such as putting new employees into a defined contribution system such as the 401(k)s used in the private section. Public workers would be able to watch their savings grow and take it with them should they move on.

A few reform bills have been introduced in the Legislature but all have died at the hands of lawmakers who themselves are PERS beneficiaries.

Over the years PERS benefits have ratcheted up 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.

Nevada local governments spend four times as much as the national average on pension expenses.

Mercatus is just providing another warning, but will anyone pay attention?

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.

Newspaper column: Retirement system officials should respect transparency

What do you do with a rogue government agency that spends billions in taxpayer dollars but constantly dissembles, denies, deceives, dodges and dithers to avoid public scrutiny and does so by spending still more taxpayer money?

For years the Nevada Public Employees’ Retirement System (PERS) has attempted to conceal from the public any specifics about the amount of public funds that are being doled out to retired public employees. PERS spends more than $1.5 billion a year on pensions and by standard accounting methods has an unfunded liability of at least $40 billion.

In 2011 in a suit filed by the Reno Gazette-Journal newspaper Carson City District Court Judge James Russell ruled PERS records — including the name of a retiree, the amount of retirement payment, name of the agency where the retiree worked and hire and retirement dates — were subject to public inspection under the state public records law.

PERS officials appealed to the state Supreme Court, which ruled in 2013 that such records are indeed public, but the agency was not required to “create” a record it did not already maintain.

Some PERS records were released and the Nevada Policy Research Institute posted that information on its TransparentNevada.com website.

In 2015, after the judge in the Reno newspaper case chastised PERS for “stonewalling” and possible lack of “truthfulness,” PERS lobbied the Legislature to specifically exempt its records from the public records law.

When that failed PERS altered its recordkeeping procedures so that records were filed by Social Security numbers only and without a name attached. Social Security numbers are “non-disclosable” by law.

NPRI filed suit.

“By replacing names with ‘non-disclosable’ Social Security numbers in its actuarial record-keeping documents, PERS has attempted to circumvent the 2013 ruling of the Nevada Supreme Court requiring disclosure,” explained Joseph Becker, the director of NPRI’s Center for Justice and Constitutional Litigation, at the time of the suit.

This past week another Carson City judge again slapped down PERS for refusing to release the names and pensions of its 57,000 public employee retirees under the state public records law.

District Judge James Wilson chastised the agency for being deceptive, noting that the law “does not require an agency to create a public record, but neither does it bar an agency from creating a record. PERS quoted in part Nevada Public Records Act: A Manual for State Agencies 2014 which states in part: ‘An agency is not required to organize data to create a record that doesn’t exist at the time of the request.’ The part PERS left out from that sentence in the Manual is: ‘but may do so at the discretion of the agency if doing so is reasonable.’ PERS failure to indicate it was quoting only part of the sentence seems a bit deceptive.”

Judge Wilson further noted that the state Supreme Court has since ruled in another case that “when an agency has a computer program that can readily compile the requested information, the agency is not excused from its duty to produce and disclose that information.”

He also dismissed as “hypothetical and speculative” claims that disclosure might subject retirees to cybercrime, noting that the opinions buoying this argument were based on releasing data such as gender, birth date and address, which were never requested.

NPRI’s attorney Becker said in a statement, “NPRI is delighted that the court has once again weighed in strongly on the side of transparency, and once again with respect to PERS. As evidenced by the recent lawsuits against the agency, the courts need to crack down on government entities, such as PERS, that thumb their noses at the Nevada Public Records Act’s requirements for disclosure.”

He noted that the court seemed especially sensitive to the fact PERS officials had changed their recordkeeping methodology in an effort to circumvent the Supreme Court ruling.

Not only did PERS spend tax money to fight the current lawsuit, it now must spend more tax money to pay attorney fees and costs to NPRI.

There are several vacancies coming up on the PERS board this year. We encourage Gov. Brian Sandoval to use this opportunity to appoint members who abide by the letter of the law and respect the public’s right to transparency in how its money is being spent.

A version of this column appeared this week in many of 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 — and the Elko Daily Free Press.

Update: On Tuesday the PERS board voted unanimously to appeal this court decision.

 

PERS wasting time and money with public records appeal

The board of the Public Employees’ Retirement System voted unanimously Tuesday to continue its stonewalling of the public’s access to its records, according to the Las Vegas newspaper.

Nevada Policy Research Institute sued PERS back in July for again refusing to release records showing the names of pensioners and the amounts of their pension. The Reno newspaper sued for those records in 2013 and won in the state Supreme Court, which found the records are clearly covered under the state public records law.

But PERS, after releasing some records as required by law, changed its recordkeeping practices conceal the names of pensioners by filing information under non-disclosable Social Security numbers instead of names, clearly a ruse to dodge the court’s ruling.

Today’s paper quoted the board’s attorney as saying the state Supreme Court should provide “black and white guidance” on how to balance confidentiality statutes and public information.

That court has already done so. In black and white.

This past week District Court Judge James Wilson spelled out clearly his rationale to requiring the records to revealed:

Considering the purpose of the NPRA (Nevada Public Records Act), to foster democratic principles by providing member of the public with access to public books and records; the legislative mandate that courts construe the NPRA liberally to carry out this important purpose; the legislative mandate that any exemption, exception or balancing of interests which limits or restricts access to public books and records by members of the public must be construe3d narrowly; the lack of evidence that producing the requested information, retiree name, years of service credit, gross pension benefit amount, year of retirement, and last employer would require unreasonable demands or costs or PERS; the fact that PERS altered its procedure in providing information to its actuary to eliminate the names of retirees in part because of the Reno Newspapers decision, the court concludes that PERS does have a duty to create a document that contains the requested information. (npri-v-pers-ruling)

 

PERS is wasting time and taxpayer dollars in a futile gesture, because in 2015, two years after the Reno newspaper ruling, the high court decided: “When an agency has a computer program that can readily compile the requested information, the agency is not excused from its duty to produce and disclose that information.

 

Newspaper column: Lawmakers must finally address public worker retirement reform

Gov. Sandoval gives State of the State speech. (R-J photo)

Gov. Sandoval gives State of the State speech. (R-J photo)

In his State of the State speech this past week Gov. Brian Sandoval tossed out tax money like trinkets and candy from a Mardi Gras parade float — a couple million here for this or that education program, a few million there for a veterans’ home, millions for a medical school, more millions for an engineering school and pay raises for state employees.

“This session, my budget includes a 4 percent cost of living adjustment and increased funding for health benefits to recognize the shared sacrifice and dedication of our state employees,” the smiling governor said about his spending proposal for the coming two years.

Overall, Sandoval proposed a 10 percent increase in the general fund portion of the state budget, even though the cost of living increase for 2016 was only 2 percent.

What the governor did not address was how the taxpayers are going to pay for the commensurately higher retirement pensions that are tied to the salaries of those state employees.

Nor did he take note of the fact his proposed budget — total budget, not just the general fund — is 49 percent higher than the total budget he proposed when he first took office, while over the past decade the Nevada median household income has fallen 17 percent.

A part of the growth in state government spending has been due to burgeoning pensions for state employees, who upon retirement are guaranteed a percentage of their highest salary level — which officially is 70 percent after 25 years, but can often top 100 percent after various pay add-ons and gimmicks are employed. Public employees in Nevada can retire in their 40s and get paid more in retirement than they were paid for actually working.

In 2008 the Las Vegas Chamber of Commerce called on the Legislature to change public employee retirement benefits from the current direct benefit plan to a direct contribution plan, similar to a 401(k), because the expenditures were growing at an unsustainable pace.

In 2011 a report drafted for the Nevada Policy Research Institute by Andrew Biggs, an economist with the American Enterprise Institute, concluded the Nevada Public Employees’ Retirement System is vastly underfunded by more than $40 billion.

“What people don’t realize,” Biggs said to a luncheon audience back then, “is your typical public sector pension plan is a lot more generous than what a typical person is going to get in the private sector. Let’s just take a person and run their wages through what they would get from PERS versus what they could get from a typical 401(k) plan combined with Social Security, because public employees here don’t participate in Social Security. They both pay the same amount on average. The total contribution is about the same, but the benefits for someone under PERS — for a full career employee — is somewhere around 50 percent higher.”

In 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 and growing.

The changes Kirner proposed would have applied to future state and local government workers and not current ones.

AB190 would have introduced a hybrid — part defined benefit, part defined contribution.

The bill also tied the minimum retirement age for receiving full benefits to that allowed under Social Security, though police officers and firefighters would be able to retire with full benefits 10 years earlier.

Kirner argued his bill would have a minimal impact on taxpayers, but the PERS administration claimed it would cost millions to implement. Kirner withdrew the bill so the funding could be studied and he could re-introduce it again this year, but Kirner decided to not seek re-election.

Instead, state Controller Ron Knecht has offered a bill nearly identical to Kirner’s, but it is questionable whether it will get much of a hearing before a Legislature that is now comprised of majority Democrats in both chambers.

This past summer NPRI’s Director of Transparency Research Robert Fellner released a 36-page report warning that if the economy stumbles the PERS “fantasy economic forecasts will be replaced by immediate bankruptcy — leaving every Silver State household with a sudden, implicit, $50,000-plus tax liability.”

Nevada lawmakers have been kicking this can down the road so long it is now a 55-gallon drum ready to explode.

A version of this column appeared this week in many of 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 — and the Elko Daily Free Press.

Public employee pension funding not likely to be addressed this session either

In 2008 the Las Vegas Chamber of Commerce called on the Legislature to change public employee retirement benefits from the current direct benefit plan to a direct contribution plan, similar to a 401(k), because the expenditures were growing at an unsustainable pace.

In 2011 a report drafted for the Nevada Policy Research Institute by Andrew Biggs, an economist with the American Enterprise Institute, concluded the Nevada Public Employees’ Retirement System is vastly unfunded. Using market accounting standards instead of government standards, Biggs estimated PERS was not underfunded by $10 billion as PERS itself reported, but by more than $40 billion.

 

At the time, according Biggs, Nevadans should have been spending nearly $6 billion a year to fully cover the cost of pension — that was equal to the total state general fund budget for two years.

“What people don’t realize,” Biggs said to a luncheon audience back then, “is your typical public sector pension plan is a lot more generous than what a typical person is going to get in the private sector. Let’s just take a person and run their wages through what they would get from PERS versus what they could get from a typical 401(k) plan combined with Social Security, because public employees here don’t participate in Social Security.

“They both pay the same amount on average. The total contribution is about the same, but the benefits for someone under PERS — for a full career employee — is somewhere around 50 percent higher.”

Lawmakers did nothing.

In 2012, Thom Reilly, director of the School of Social Work at San Diego State University and former Clark County manager, came out with his book, “Rethinking Public Sector Compensation: What Ever Happened to the Public Interest?”

“To no surprise,” Reilly said, “the premise of the book is: Because we have not managed it well, we have created a system that is not only unsustainable but creates serious challenges for service delivery and efficiency, is rife with conflict. Basically, it’s created in the public system an ethically troublesome personnel system.”

In the book, he writes, “Difficulty raising or generating taxes to cover these unfunded liabilities has already surfaced. In states and local jurisdictions, payments to cover these liabilities are crowding out revenues for parks, road repairs, schools, universities, and safety net programs for the poor and elderly.”

Lawmakers did nothing.

Also in 2012, Biggs and Jason Richwine reported in The Wall Street Journal that public employees don’t work as hard as those in the private sector — following on their previous discoveries that public employees are overpaid in general, and teachers in particular, and their pensions are far richer than those in the private sector and they can retire decades sooner — which was especially true in Nevada.

In 2014 a researcher at the American Enterprise Institute did the calculations and found Nevada’s public pensions are the richest in the nation — $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, especially in Nevada.

Lawmakers did nothing.

In a 2015 editorial in Battle Born Media newspapers called for pension reform. It backed Reno Republican Assemblyman Randy Kirner’s Assembly Bill 190, which called for reforming PERS, which was costing at the time  nearly $15,000 per Nevadan per year and growing.

The changes Kirner proposed would have applied 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.”

AB190 would have introduced 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.

Kirner’s bill also would have ended 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 tied the minimum retirement age for receiving full benefits to that allowed under Social Security, though police officers and firefighters would be able to retire with full benefits 10 years earlier.

Lawmakers did nothing.

This past summer NPRI published “Footprints: How NVPERS, step by step, made Nevada government employees some of the nation’s richest.”

Written by NPRI’s Director of Transparency Research Robert Fellner, the 36-page report warned that “should today’s international no-growth economy stumble into the deep financial crisis that many forecasters fear, NVPERS’ fantasy economic forecasts will be replaced by immediate bankruptcy — leaving every Silver State household with a sudden, implicit, $50,000-plus tax liability.”

The report detailed how NVPERS 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.

Fellner noted that local government employees have taken advantage of their collective bargaining union contracts and negotiated to have their employers actually pay the employees’ pension contribution, claiming this is done in lieu of a salary increase or in conjunction with a salary decrease — even though local government pay checks rank eighth highest in the nation.

This week Gov. Brian Sandoval delivered his State of the State speech. In it he said, “This session, my budget includes a four percent cost of living adjustment and increased funding for health benefits to recognize the shared sacrifice and dedication of our state employees.”

That means pensions will increase accordingly.

Sandoval said not one word about pensions.

The Las Vegas newspaper made note of that this morning in an editorial:

Also notable in the budget proposal is what’s missing.

“Even after overcoming the effects of the recession,” noted a 2016 report by the Pew Charitable Trusts, “states face financial pressures that will shape budgets now and for years to come. A major issue for a number of states is how to cope with an accumulation of unfunded public pension and health-care liabilities.”

Yet the governor’s budget contains no plan to reform the state retirement system or to address its massive unfunded liability, one of the highest in the country, per capita.

Perhaps a few lawmakers will pick up the cause. But if inertia on this looming issue remains the preferred course of action among those in Carson City, there soon will come a time when there won’t be enough money in the entire state to dig taxpayers out of the abyss.

If you are making book on what the lawmakers will do, just note the history of shrugging off this looming crisis.

 

Editorial: Court should slap down public pension records trickery

There is contempt of court. There is contempt of Congress. But there should also be contempt of public.

This past week Nevada Policy Research Institute’s (NPRI) legal arm, Center for Justice and Constitutional Litigation (CJCL), filed suit in district court in Carson City seeking to force the state Public Employee Retirement System (PERS) to release information about the taxpayer-funded pensions of retired public employees.

After the Reno Gazette-Journal newspaper sued under the public records law in 2013 and won in the Nevada Supreme Court, this information was disclosed for 2013 and 2014 and posted on NPRI’s TransparentNevada.com website — names, former employer, years of employment, retirement year and pension amounts.

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.

But when NPRI filed a public records request for the same information this year for 2015, PERS had changed how it compiles the data. It replaced the names with Social Security numbers, making the data useless.

”By replacing names with ‘non-disclosable’ Social Security numbers in its actuarial record-keeping documents, PERS has attempted to circumvent the 2013 ruling of the Nevada Supreme Court requiring disclosure,” explained Joseph Becker, the director of CJCL.

After two years of disclosing the pension records, the bureaucrats at PERS apparently decided to nit pick a portion of that 2013 Supreme Court ruling that said, while public records must be disclosed, the agency has “no duty to create a new document by searching for and compiling information from existing records.” In order to circumvent the law, PERS altered its records.

But as Becker points out in his suit, there is a 2015 case out of the Nevada Supreme Court in which the court held that “when an agency has a computer program that can readily compile the requested information, the agency is not excused from its duty to produce and disclose that information.” LVMPD v. Blackjack

In an NPRI press release about the litigation, Becker is quoted as saying, “Not only has PERS attempted to re-engineer its record-keeping in a way that obscures from public view its critical financial instability — for which the taxpayers of Nevada are ultimately on the hook. PERS is also violating both the letter and spirit of the Nevada Public Records Act …”

The manipulation of the records by PERS is a clear act of contempt for the public, as well as the law and the courts.

The purpose of the public records law (NRS 239) is made abundantly clear by its opening paragraph: “The Legislature hereby finds and declares that:

“1. The purpose of this chapter is to foster democratic principles by providing members of the public with access to inspect and copy public books and records to the extent permitted by law;

“2. The provisions of this chapter must be construed liberally to carry out this important purpose;

“3. Any exemption, exception or balancing of interests which limits or restricts access to public books and records by members of the public must be construed narrowly …”

We urge the court to make short work of this naked effrontery.

A version of this editorial appears this past 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.

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