EDITORIAL: Bull market shouldn’t camouflage need for public pension reform

The booming stock market has fortified millions of individual retirement accounts and created widespread investment opportunity. It has also provided a dose of good news for the nation’s beleaguered public pension systems.

Nevada officials in July touted an 11.8 percent return in fiscal 2017 for the state’s Public Employee Retirement System. California’s system, the biggest in the country, hit 11.2 percent. Overall, The Wall Street Journal reported this week, retirement funds for public workers “earned median returns of 12.4 percent for the fiscal year ended June 30.”

Despite the healthy performance, “many of these public pensions remain severely underfunded … meaning they don’t have enough assets on hand to fill all promises made to their workers,” the Journal noted.

Depending on accounting methods used, Nevada’s system has an unfunded liability of as much as $50 billion. Even with the optimistic assumptions made by those overseeing the fund, the system has only about 75 percent of what it needs to pay future benefits.

The deficit is compounded by generous rules that allow workers to maximize benefits through salary manipulation and to receive checks for life after retiring at an early age.

“Many pensions are preparing for lower returns by scaling back predictions of what they will earn in the future,” the Journal reports, which will push taxpayer liabilities higher. California has done precisely that to get a more accurate picture of its obligations. Nevada’s PERS assumes an 8 percent annual return, an expectation that Connecticut’s state treasurer told the Journal was “unrealistic.”

While welcome news for both the taxpayers who fund the programs and the government workers who depend on them, the bull market shouldn’t camouflage the need for public pension reform, in Nevada and elsewhere.