This country needs all the good economic news it can get. And it sure won’t come from stories about public employee pensions, which are in far worse shape than anyone realizes.
By now, most taxpayers know states and local governments haven’t funded all the pension benefits they’ve promised to retirees and current workers. Especially over the past 20 years, benefits have been sweetened by politicians and paid for — on paper, at least — by projecting higher rates of return on pension fund investments. But collecting larger gains on portfolios requires taking more and larger risks. And greater risk means a greater chance of loss.
A new report by State Budget Solutions says state pensions are underfunded by $4.1 trillion — only 39 percent funded overall — because projected annual portfolio returns of between 7 and 9 percent are too optimistic. Nevada’s pension system promises such returns and still has an unfunded liability of more than $10 billion. If Nevada’s liability is calculated with a more accurate assessment of risk, that burden triples or quadruples.
The taxpaying public is on the hook for those promised benefits, even after pension fund assets run dry. And it’s easy to see why those funds, which currently hold trillions of dollars in taxpayer assets, will one day run dry: Public employees’ pension benefits are skyrocketing along with their salaries.
This week, the Sacramento Bee reported that average pension payouts for newly retired California public employees had doubled between 1999 and 2012, and that benefits had tripled for public safety workers. Overall, new public-sector retirees get an average monthly benefit of $3,025, with local government public safety workers getting $6,867 monthly. Meanwhile, private-sector wages were stagnant for that same period, according to federal data.
The burden of those benefits is worse when you consider that public employees can start collecting pensions in their 40s and receive more pay in retirement than they received as workers.
How bad is it in Nevada? We don’t know. The Nevada Public Employees Retirement System has long misread state law and kept pension benefits secret. A District Court judge rightly ruled nearly two years ago that pension benefits are clearly public records. It simply makes no sense that taxpayers fund the state’s pension system and are liable for its promised benefits but can’t learn how much government retirees are being paid. PERS appealed that District Court decision to the Nevada Supreme Court, which has heard arguments but hasn’t ruled.
We can’t fix our public pension problem if we don’t know how bad the problem is. The Supreme Court must uphold pension transparency.