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EDITORIAL: Pension reform R.I.P.

It’s often said — usually by the winners — that elections have consequences. That’s especially true at the grassroots level, where balloting for state and local races will likely have more community impact than the outcome of high-profile national races.

Democrats on Tuesday regained control of both the Nevada Assembly and Senate. That’s bad news for progress and reform on a number of different fronts.

Take pension reform, for example.

Few candidates for the Assembly or state Senate want to talk about it, and fewer still want to do anything about it. Yet as rising pension obligations swamp more and more jurisdictions, inaction becomes malfeasance. How long can taxpayers expect to fund lucrative retirement benefits for public employees that are unavailable to the poor saps in the private sector footing the bill?

The Nevada Policy Research Institute, a free-market think tank in Las Vegas, reported last week that more than 1,600 retired state pubic employees collect at least a $100,000 a year in pension benefits. That’s every year — for life. Former UNR football coach Chris Ault, who took home $278,497, led the list.

The Institute’s Robert Fellner points out that Nevada taxpayers and public employees contributed almost $1.5 billion to the system in 2013, which equaled 12 percent of all state and local tax revenue combined that year. That’s the second highest rate in the nation.

In addition, Mr. Fellner reports that about $600 million of that money went toward paying the retirement system’s debt, which has soared given its failure to regularly reach its overly optimistic investment goals. That money “provides no benefit whatsoever to the current worker, taxpayer or employer paying the ‘pension tax,’ ” he writes.

Officials with the Nevada Public Employee Retirement System argue that the benefits are set by statute and that most retirees receive more modest annual stipends. The average yearly pension for police and firefighters in 2015 was just below $60,000. For non-public safety workers, the number is $33,180.

But that latter figure is meaningless without accounting for years of service. And, in fact, Mr. Fellner notes that the “average” PERS recipient collecting $33,180 has worked an “average” of just 19 years. Imagine retiring in the private sector after less than two decades and collecting a guaranteed annual payout of more than $33,000 for life. The only place that happens is in Dreamworld.

State lawmakers, mostly Republican, have offered a host of proposals to reform the system, most of which would grandfather in current employees. But these proposals — beyond those tinkering around the edges — meet a quick death in Carson City thanks to a lack of Democratic support.

One obvious reform would be to transition the system — which has an unfunded liability of between $11 billion and $52 billion, depending on accounting metrics — from a defined benefit plan, which promises a specific annual payout based on years of service and salary history, to a defined contribution approach now common in the public sector and embodied in 401(k) plans.

State Controller Ron Knecht has asked for a bill draft along these lines. But expect it to receive a chilly reception — particularly given the new makeup of the Legislature — until taxpayers demand reform at the ballot box.

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