Problem facing PERS obvious; solution will be complicated beyond measure

The formidable contingent representing the Las Vegas Chamber of Commerce would hate to be called dreamers. They’re a practical and studious bunch, and it appears they’ve done their homework.

With help from respected fiscal analysts Guy Hobbs and Jeremy Aguero, the chamber has just published a study that could give nightmares to the keepers of the government status quo. It’s called “An Overview and Comparative Analysis of the Nevada Public Employees’ Retirement System.”

In short, Nevada’s PERS is headed for a world of hurt, and its worsening health should concern all taxpayers. Currently with a $6.3 billion unfunded liability, the system jeopardizes future budgets and funding for everything from education to public safety, the chamber’s study concludes.

Let’s be candid. It’s hard to imagine a study emanating from the Las Vegas Chamber of Commerce ever reaching the conclusion public employees ought to be better paid. When your stated mission is “to strengthen, enhance and protect business in Nevada,” you’re unlikely to ever be overheard chanting for bigger government and higher taxes.

But that’s what makes the chamber’s latest pitch so intriguing and thoughtful this time. It wisely commissioned Aguero of Applied Analysis and Hobbs of Hobbs, Ong & Associates to generate the PERS study. Both have won the respect of clients and reporters with their reputations for compiling solid numbers and reaching credible conclusions.

For working people, a PERS package is to be prized. For regular employees, the taxpayers contribute 20.5 percent of their salaries to fund retirement after as few as 28 years on the job at a rate of 75 percent of their highest three-years salary. For police and firefighters, the taxpayers put 33.5 percent of salary into the retirement package and they can retire at 75 percent of pay after only 25 years. Although overtime is excluded from the pension formula, when you add in hazard pay, callback time and other add-ons, retired public employees do substantially better than many in the private sector.

Nevada might lag far behind in the areas of public education and social services, but its public employees’ retirement plan is the most generous in the nation.

Years ago, the argument held, public employees received juicier pensions because they performed difficult duty for salaries far inferior to those available in the private sector. Trouble is, in many areas of local and state government in Nevada, that’s no longer the case.

It’s not difficult to see PERS needs to be adjusted if it’s to remain solvent, but how do you trim the sails of such a cumbersome and politically connected ship?

The chamber believes the best method is to change the whole heavy system from its current status as a defined- benefit program to a defined- contribution plan such as the 401(k) programs that many in the private sector feed. A few states are making that transition, with mixed success.

Other states are trimming retirement add-ons such as callback pay. Still others are planning to funnel new hires into a system with a substantially smaller formula multiplier, which in Nevada is a lusty 2.67 percent annually.

In bruising economic times, all these changes look good on paper and figure to help balance the public employee retirement books to greater and lesser degrees. But I think the chamber is dreaming if it plans to walk into the 2009 Legislature and drop its impressive study on the toes of elected officials who know very well the power of all those public employees and their unions.

Politicians who depend on the grass roots and fundraising skills of the police and firefighters unions, not to mention their coveted endorsements, will think twice before signing on to turn Nevada PERS into a glorified 401(k), which these days shines like a Ferrari but performs like a Yugo.

From a practical standpoint, winning even a few substantive changes at the Legislature will probably prove difficult unless the economy slips further into recession. But if the chamber pumps a substantial amount of its members’ money into a marketing campaign designed to rein in PERS in the face of a worsening economy, many politicians will at least find the problem difficult to ignore.

The good news for taxpayers is this report should at least be a conversation starter in Carson City.

Beyond that, hope for a great Public Employee Retirement System debate might end up being just a dream.

John L. Smith’s column appears Sunday, Tuesday, Wednesday and Friday. E-mail him at or call (702) 383-0295.

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