Jim Clark: Randy Kirner, and Nevada’s PERS problem (opinion)
Randy Kirner has represented Incline Village/Crystal Bay in the Nevada Assembly since 2010.
Always affable, pleasant and constituent-oriented, it’s hard to picture him as a trained killer, but he did serve as an Army Ranger, Master Paratrooper and Pathfinder with the 101st Airborne Division earning a bronze star, air medal, combat infantryman’s badge and Army commendation medal for service in Vietnam.
Following the military, Randy earned advanced management degrees and launched into a distinguished career in industry. His last employment was as vice president and human resources director for International Game Technology from which he retired. Gov. Kenny Guinn (R-NV) twice appointed him to Nevada’s Public Employees’ Benefits Program Board; he was reappointed by Gov. Jim Gibbons (R-NV).
Sadly, Randy chose not to run for reelection this year, and his third and last term in the Assembly will end after the November election, albeit he and his colleagues are in special session wrestling with a proposed Las Vegas room tax increase to help pay for a stadium to house the Oakland Raiders.
Throughout his legislative career, Randy has sounded warnings about the financial viability of Nevada’s Public Employees’ Retirement System (PERS) but few people listened.
Too bad! PERS is like Social Security in that it guarantees Nevada’s state, county, city, school, police, fire and agency workers a pension calculated as a percentage of their highest average salary. The amount of that pension is estimated when a worker comes into the system and the employing agency must contribute 28% of the worker’s salary (40.5% for police and fire staff) to the PERS System (most employing agencies pay half and the worker pays half).
So what’s the problem? If this worker earns $50,000 a year PERS will have collected $1,400 by the end of year one. On retirement PERS will owe that person a pension for life equal to as much as 75% of his/her salary.
Of course, PERS will collect 28% of the worker’s salary until retirement in, say, 30 years but that would only be $42,000. If the pension entitlement is 75% of $50,000 that’s $37,500 per year which will eat up the nest egg in a year and two months. That’s called an “unfunded liability.” However, PERS plans to invest the pension contributions so the fund’s earnings will cover pension liability for as long as the worker’s post-retirement expected life span.
Problem solved? Well we know the math doesn’t work for Social Security or Medicare because trustees of those funds have announced the dates their resources will be exhausted. And tinkering with either fund is popularly believed to result in immediate political death for the tinkerer (although George W. Bush tried). But I digress.
The math would work for Nevada PERS if the projected investment return is high enough. PERS has assumed an investment return of 8% per annum and actually earned that and more in good times past but suffered a 16% loss in 2009.
The PERS Board are not investment experts; in fact all are members of the PERS system. So they hired consultant Wilshire Associates to evaluate things. Wilshire advised that that 8% is a pipe dream in this market and even if the fund earned 5.85% PERS’s unfunded liability would balloon from the present $11.4 billion to over $38 billion in ten years.
If PERS experiences a shortfall they go to Nevada’s agencies and increase contribution requirements. But half of that money comes from taxpayers and the other half from public employees so how’s that going to work
Last legislative session, Randy tried to fix the problem proposing to gradually convert PERS to a defined contribution plan but he was fiercely opposed by public employees’ unions. Now he’ll be a private citizen again.
Well, Randy, the problem’s still here. We hope you can still fit into your “killer’s” uniform so you can bang some heads together.
Jim Clark is president of Republican Advocates. He has served on the Washoe County and Nevada GOP Central Committees. He can be reached at email@example.com.