How pensions in Nevada are often better than paychecks
Know a public employee in Nevada who is looking for a pay raise?
Tell him to retire.
According to a new analysis made possible by the court-ordered release of Nevada’s Public Employee Retirement System payment records, once-public employees in the Silver State are making golden pensions — so generous that their compensation in retirement is often higher than the base pay they received while employed.
The analysis, published by the Nevada Policy Research Institute, compares data from seven local governments and finds that public employees’ pensions are worth, on average, 100.59 percent of their final full year of base pay.
That means when one retires from a government job in Nevada, one often gets a raise! Moreover, the analysis doesn’t account for cost of living increases that continue for what are usually decades-long retirements.
Retirees of the Las Vegas Metropolitan Police Department faired best, receiving an average of 112.39 percent of their highest year’s salary in retirement. Clark County retirees received a 2 percent pay raise upon retirement, receiving 102.04 percent of their base pay. Their counterparts in Washoe County and the cities of Las Vegas, Henderson, Reno and North Las Vegas received pensions that were 87.5 to 98.7 percent of their final year’s salary.
Additional analyses were performed on data for employees and retirees of Clark County and Washoe County school districts, where pensions are slightly less than final year base pay, but still shockingly high. CCSD retirees retire with 90.11 percent of their final year’s salary, while employees in the WCSD receive 85.6 percent of their pay in retirement.
Compounding the problem is the reality that public-sector workers are often able to retire as much as two decades before those in the private sector, meaning government retirees can draw retirement benefits for nearly as long, if not longer, than the length of their careers.
All this comes at a time when taxpayers are contributing more to support public pensions, while seeing PERS’ investment returns dwindle. And — if those taxpayers work in the private or nonprofit sectors — they most likely must put more toward their 401(k)s as their employers contribute less.
The system’s unfunded liability has grown to a massive $40 billion due to the harsh reality that PERS’ actuarial investment returns are failing to reach the 8 percent expected rate of return that the system assumes. In fact, from 2002 to 2013, PERS only topped that rate once.
As a consequence, taxpayers have been forced to dramatically increase the amount they pay on pensions. Contributions to police and fire employees’ pensions have risen from 28.5 percent of salary in 2001 to 40.5 percent of salary in 2014 — a 42 percent hike. For other employees, contribution rates in that time period rose from 18.75 percent to 25.75 percent, or 37 percent.
Private citizens are being asked to pay higher taxes to cover the generous pensions of public-sector retirees who may retire 15 to 20 years before the private employees footing the bill.
With Republicans in control of Carson City for the first time in 85 years, the time has never been better to implement sustainable pension reform that benefits both the retiree and the taxpayer. If Nevada is serious about addressing PERS’ failures, it should mimic the reforms made in Utah, which now has a hybrid pension system that allows workers to choose a defined-benefit or defined-contribution plan, but limits taxpayer contributions in both cases.
As is the case with private-sector workers, government employees who choose a defined-contribution plan would be able to take their retirement savings with them if they changed jobs, making this style of retirement plan particularly attractive to younger workers. Additionally, these savings are a tangible asset that retirees can pass onto their children in death, which beneficiaries in a defined-benefit plan are unable to do.
At the same time, defined-contribution plans limit taxpayers’ risk by setting the amounts to be invested in the retirement account, leaving the retirees to assume the risk in their investment, as is the case in the private sector.
If the Silver State is to remain solvent and strong into the future, these golden-parachute pensions that threaten to bankrupt taxpayers must be addressed. It’s time Nevada look to states like Utah that have made the difficult but necessary choices to curb their ballooning debt and replace their retirement system with a 21st Century model that works for taxpayers and retirees.
Chantal Lovell is the deputy communications director of the Nevada Policy Research Institute.