EDITORIAL: Free to choose

For years, a handful of legislative Republicans have tried to revamp Nevada’s public employee pension system to better shield taxpayers from massive financial liabilities.

The few successful reforms to emerge out of Carson City, however, have mostly tinkered around the edges.

One primary goal should be to transition the state’s Public Employee Retirement System away from a “defined benefit” model toward the “defined contribution” approach now common throughout the private sector for the taxpayers who must fund government programs.

Under a defined benefit plan, retirees receive monthly checks for an amount based on their salary history and length of service. Under a defined contribution plan, workers contribute to individual accounts which accrue based on monetary allocations and investment decisions.

Public-sector unions love the defined benefit approach because it’s massively more expensive and generous, allowing workers to retire at ages unheard of in the private sector and collect nice checks for life. Meanwhile, politicians can manipulate the rules to ensure a steady stream of taxpayer revenue in the short term.

In the long run, though, such systems risk insolvency and threaten the financial health of state and local governments — and, by extension, the retirement security of future public-sector workers. Nevada’s system, for instance, has an estimated $12 billion unfunded liability and has consistently fallen short of its optimistic projections for annual returns.

Now comes state Controller Ron Knecht with a bill draft that would offer state workers the option of creating their own personal retirement accounts.

Some proposals in years past would have allowed existing public employees to continue in the current system, while creating a defined contribution plan for new hires. But none of these ever mustered enough political support.

Mr. Knecht’s plan would simply give state workers the choice of staying in PERS or opting out to start their own individual accounts that would afford them more control over their personal financial planning. Those who opted for the latter could not return to PERS.

Nevada’s legislative Democrats have steadfastly refused to consider most public-sector pension reforms. But as more and more municipalities — and even states — find themselves buried under these mushrooming obligations, inertia will no longer be an option. While the fiscal details of the controller’s bill must still be determined, it’s a reasonable step. Who could be against simply providing workers with the freedom to choose?

A previous version of this editorial incorrectly identified the plan public-sector unions love.