For decades, politicians in Nevada and across the country have blissfully adopted an “If we ignore it, maybe it’ll go away” approach to the public-sector pension crisis. But it’s not going away.
The Pew Charitable Trusts this week released its latest report on the fiscal health of government pensions. The news remains grim — and continues to get worse.
“Many state retirement systems are on an unsustainable course, coming up short on their investment targets and having failed to set aside enough money to fund the pension promises made to public employees,” the study concludes. “Even as contributions from taxpayers over the past decade doubled as a share of state revenue, the total still fell short of what is needed to improve the funding situation.”
Among the findings for the year 2016:
■ States had a cumulative deficit of $1.4 trillion, up a whopping 27 percent from 2015. The trend has been ever upward since 2000.
■ The average pension system assumes an annual return on investment of 7.5 percent, a number that allows many states to disguise funding shortfalls by projecting overly optimistic gains. The systemwide average return in 2016 was 1 percent.
■ States are now taking on higher levels of investment risk in order to try to minimize shortfalls, an approach that could have major long-term consequences in the face of market volatility.
■ Only four states — New York, Tennessee, South Dakota and Wisconsin — had at least 90 percent of the assets needed to pay promised benefits. Nevada was at 72 percent, ranking in a tie for 20th.
The crisis is directly tied to political decisions dating back decades to curry favor with government unions by increasing retirement payouts and benefits. In return, those same labor organizations donate generously to elected officials — largely Democrats — who support sweetheart pension deals.
Left staring agape at the check are the taxpayers, most of whom have no access to the type of retirement benefits they are forced to fund for government workers.
Democrats may want to rethink this dynamic. While some states and municipalities may have years until they face a day of reckoning, others are teetering at the edge of the abyss thanks to generous pension payouts. Short of bankruptcy, officials will have to make difficult decisions that could be tough to explain to voters.
“As states try to prop up their pension funds,” The Associated Press reported Thursday, “it means less money is available for core government services such as education, public safety and parks.” And absent reform, the possibility increases that current public employees won’t see the benefits they’ve been promised.
The market’s strong performance in 2017 might act as a tourniquet on this spurting wound. But this issue won’t just “go away” — and Nevada lawmakers who refuse to uncover their eyes should bow out of Carson City.