Nevada public employee pension program must be reformed to be fair and save tax dollars

A new analysis of Nevada’s Public Employees’ Retirement System reveals just how out of whack state public government workers retirement pay is compared to those in the private sector who must foot the bill.

 

For the first time — due to the fact a judge has forced PERS to comply with the public records laws and release data about public employee retirement pay — Nevada Policy Research Institute has been able to calculate just what government retirees are being paid compared to their final year’s base salary.

NPRI researchers looked at retiree pensions of those who worked for 30 years and retired in 2013 in 10 government entities — the state of Nevada, Clark County, Washoe County, Las Vegas, Henderson, North Las Vegas, Reno and Las Vegas, as well as the state’s two largest school districts, Clark County and Washoe County. Not all retirees have worked 30 years.

Though the law states that public workers may retire after 30 years on the job at no more than 75 percent of the average of the final three years’ pay, NPRI found that state of Nevada employees who retired after 30 years are being paid nearly 84 percent of their final year’s base pay — and that is probably lower than the real percentage because the state refuses to release the salaries of law enforcement officers. Law enforcement in the cities and counties studied were drawing pensions greater than 114 percent of final base pay.

(Public workers hired before July 1, 1985, could retire at 90 percent of compensation after 36 years.)

The retirees from the cities and counties are getting more than 100 percent of final pay and the two school districts average 89 percent.

This is partly due to the fact PERS counts as salary such things as call back, longevity and certain premium pay, as well as the employee’s portion of PERS contribution, though not overtime.

One problem is that PERS has an unfunded liability of more than $40 billion — when using standard accounting practices, which the government does not — and has only once in the past decade generated the required return on investments to cover its obligations, according to NPRI. Also state and local taxes have been raised over the years to cover the ever-increasing employer contributions — up 42 percent from 2002 to 2013 for police and fire employees and up 37 percent for others.

Since PERS is a state-operated system, any shortfall is not just the obligation of local governments, but of every taxpayer in the state, no matter where the retiree worked.

There is also the matter of fairness.

A study by Interest.com based on 2011 Census Bureau data found that households headed by people who are 65 or older are bringing in median income that is just 57 percent of the median income of households headed by 45- to 64-year-olds.

Private sector employees must work half again longer than public sector workers before being eligible for retirement benefits.

Public employees in Nevada may retire after working only 25 years and then purchase up to five years of service credit called “airtime” and draw a full pension check for the rest of their lives and that of their spouses, if they so choose. Plus the pension is indexed to inflation. A government retiree can easily draw more taxpayer money in retirement than on the job.

We call on the Legislature to finally rein in this burgeoning unfunded liability by ending this defined benefit program and placing all new hires on a defined contribution program, similar to the 401(k) plans used by the private sector.

They should end the practice of allowing the purchase of “airtime” and not allow retirees to start drawing pensions until the age of 62, as well as making other reforms to keep the taxpayer from having to fund a retirement system that they themselves have no chance of even dreaming of. — TM

Speak Your Mind

*