Nevada’s public employee pension fund is well-managed and actuarially sound when compared against those of other states, according to an independent review of the plan requested by Republican Gov. Brian Sandoval.
The report by AonHewitt might seem like good news to the taxpaying public, thereby reducing the urgency of politically perilous pension reforms. As reported Tuesday by the Review-Journal’s Sean Whaley, the report says the Public Employees Retirement System of Nevada is positioned to be fully funded in the decades ahead, provided it continues to average at least 8 percent annual returns on its investments.
But the best argument for pension reform is not how Nevada’s fund compares to those of other states. It’s how public employee pension benefits compare to the compensation and retirement options available to the taxpayers who fund the pension system. Which is to say they don’t.
That’s because the defined-benefit pension has all but vanished from the business world. Portable savings plans such as 401(k)s have taken their place, and many companies can no longer afford to provide matching contributions. Workers largely are on their own in saving for retirement, with the insolvent Social Security system as a backstop to poverty.
Yet they’re also on the hook for the retirement of public employees, who can start collecting benefits after as few as 20 years of work. Already, taxpayer-funded pension contributions are squeezing public services such as public safety and education. Those contributions are creeping ever higher to ensure PERS can make good on its generous benefits, which are based on top salaries, not an average of lifetime earnings.
And if PERS can’t make good on those promises? Taxpayers will bail out PERS so government retirees can collect their promised benefits. Indeed, the AonHewitt report says PERS’ unfunded liability balloons from $11.2 billion to $25.4 billion if the fund realizes only 6 percent returns.
This report certainly will bolster the resolve of the Legislature’s majority Democrats to resist any changes to PERS, but that might not matter. Nevada’s chances for pension reform hinge on a pending Nevada Supreme Court ruling on pension transparency. In Nevada, pension benefits have long been kept from the public. That has to change.
The issue isn’t whether Nevada has a good pension system. It’s whether taxpayers should be squeezed to pay for an ever-more-expensive pension system in the first place.