November 25, 2023 - 9:01 pm
Ebenezer Scrooge and the Public Employees’ Retirement System of Nevada have this in common. Both would have a much better future if they would learn from their mistakes.
In Charles Dickens’ Christmas classic, Scrooge’s problem is that he’s a rich, but a miserable and lonely old man. PERS is rich in the sense that it controls more than $50 billion in assets. But unlike Scrooge, PERS doesn’t have enough money. Its funded ratio is only 75.2 percent. In total, its unfunded liability is around $18.8 billion. Those numbers are from the most recent actuarial valuation of PERS.
Scrooge’s perspective changes after he’s visited by three spirits. The Ghost of Christmas Past takes him back to his childhood and younger days. He sees that there were people who cared about him, but he rejected their affections in pursuit of money.
The Ghost of Pensions Past would show something similar for PERS. The retirement program wasn’t supposed to burden future generations. Politicians promised contributions from employees and employers (taxpayers), combined with investment returns, would provide enough to fully fund retirees’ future payouts. It didn’t happen. PERS has raised contribution rates dozens of times since its inception decades ago.
The Ghost of Christmas Present shows Scrooge what was going on around him. People were joyously celebrating Christmas. His nephew, Fred, was having a party. And Tiny Tim, the son of his employee, Bob Cratchit, was happy despite his serious illness.
For PERS, the present is much less joyous. Contribution rates, split between the employee and employer, are 33.5 percent for regular employees and 50 percent for police and fire employees. That isn’t enough. PERS knows the contribution rates should have been 35.18 percent and 54.18 percent, respectively. Its board decided to phase in those increases over four years, presumably to avoid public outrage and scrutiny. The downside is clear. The current contribution rates are “insufficient” to reduce the unfunded liability, the study noted. All other things being equal, that “will lead to increases in future statutory contributions.”
The Ghost of Christmas Yet to Come shows Scrooge the outcome of his current path. He would die unmourned. That scared Scrooge into transforming his ways. He embraced generosity and compassion, reconciled with his nephew, raised Cratchit’s salary and helped care for Tiny Tim.
Likewise, the future for PERS on its current course is bleak. Contribution rates will continue to soar in a feeble attempt to avoid the fate of Chicago and New Jersey, where overly generous pension plans are hemorrhaging.
Unfortunately, PERS appears more hardhearted than even Ebenezer Scrooge. As Tiny Tim might say, “God help us, every one.”