Jim Clark: Fixing Nevada’s PERS pension problem
March 11, 2015
Gov. Brian Sandoval's State of the State speech was jam packed with ideas for his reform agenda.
His area of emphasis was to fix public education, a change-resistant colossus that prior legislatures have unsuccessfully tried to fix by throwing taxpayer money at it.
Other reforms high on his list included curbs on public employee collective bargaining and squeezing the waste out of public building costs by requiring competitive (union and non-union) bidding.
But he only made a brief mention of fixing Nevada's Public Employee Retirement System (PERS).
“And when these chickens come home to roost, where will all these government employers get the money? We taxpayers, of course.”
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What needs fixing? By one estimate, PERS is legally committed to pay defined benefit pension liabilities of about $41 billion dollars more than it has or will have in the future.
$41 billion? Take Gov. Sandoval's proposed $7.3 billion biannual budget and imagine that from 2016 forward, Nevada had only income and no expenses.
It would take more than 10 years of revenue to fix that $41 billion dollar deficit. But running Nevada for 10 years with zero expenses is not going to happen; so where will the money come from to cover the shortfall?
It will come from the state of Nevada, all 17 counties and school districts, all police and fire departments in Nevada, and all cities, towns and general improvement districts in Nevada (except IVGID …. more on that later); in short any governmental instrumentality which employs people.
All of these entities contribute to PERS based on salaries paid to their staffs. In most cases public employees pay 5.75 percent of their salaries into PERS and their employer pays the rest.
How much is the "rest"? It's 20 percent for regular employees and just fewer than 40 percent for police and firefighters.
And when these chickens come home to roost, where will all these government employers get the money? We taxpayers, of course.
How did the shortfall come about? The PERS board is required by Nevada law to consist of 7 members, all of whom must be state of municipal employees with at least 10 years tenure, so it's like the fox guarding the chicken coop.
Add to that the sweetheart deals that public employee unions make regarding overtime pay, longevity pay, etc., that bump retirement benefits and the relatively short qualifying period (20 years if they purchase 5 years of "air" time) the mathematical result becomes a certainty.
Faced with that reality, the PERS board kicks the can down the road by assuming an unrealistic annual return on fund investments so everything looks hunky dory.
Although Gov. Sandoval gave short shrift to PERS reform Incline/Crystal Bay's Assemblyman, Randy Kirner, R-Reno, a former Public Employees' Benefits Board Chair, has tried to fix this problem since he was first elected, only to have his proposed bills killed by Democratic committee chairs.
Now that the GOP controls both the Nevada Senate and Assembly, he finally saw his chance.
His first proposal was Assembly Bill 3, a modest proposal that would add two public members to the PERS board who could not be beneficiaries and who must have knowledge or experience in the management and design of retirement plans.
What happened? Due to vociferous public employee union opposition, the measure lost in a vote in the Government Affairs Committee.
But Kirner is not giving up. His AB 190 would create a PERS pensions into a defined contribution plan for employees hired after July 1, 2016, which will make the plan sustainable.
I said above that IVGID employees are not in the PERS system. When IVGID was first formed, it signed an agreement with Social Security.
Our GID also provided employees with a sort of 401k plan that is individual to each staffer. A few years ago, IVGID was investigating PERS and was told by Social Security that it could not exit the program.
Hallelujah. Whatever happens with pension reform, local taxpayers will not have to bail out IVGID. However, we could still be on the hook for Washoe County, the school district, etc.
Epilogue: Randy Kirner is fighting on a lonely battlefield. We need to support him.
Jim Clark is president of Republican Advocates. He has served on the Washoe County and Nevada GOP Central Committees. He can be reached at firstname.lastname@example.org.