May 29, 2023 - 9:01 pm
Candor is a rare commodity in politics. It’ll be even scarcer if the Las Vegas police union gets its way.
The Las Vegas Police Protective Association recently sued the Public Employees’ Retirement System of Nevada. The union supported Assembly Bill 351, which would create a deferred option retirement program. It would allow retirement-eligible public safety employees with at least 25 years of service to continue working while banking their pension payments.
The goal is to address staffing shortages by encouraging older employees to remain in their jobs. That’s certainly a worthy goal. Like many employers, police agencies throughout the state are struggling to attract employees. Nevada’s generous defined-benefit retirement system incentivizes many employees to retire well before their private-sector counterparts.
As part of the legislative process, state agencies and municipalities can submit fiscal notes on bills. These offer an estimate for lawmakers of how much a proposal will cost. This is certainly important information. A bill that may be a good idea at no cost may become a bad idea at a price tag of $50 million.
With regard to the new retirement option, PERS told lawmakers that its “actuary estimated the cost of this new benefit to be 1.14% of the police/fire payroll.” In other words, this program would require higher contribution rates from state and local governments (read: taxpayers) and their employees.
The union contends that this effectively killed the bill, which is exempt from deadlines yet hasn’t advanced out of both houses.
“Plaintiffs are informed and believe that the defendants are aware that the information contained in the fiscal note is inaccurate and misleading,” the police union’s lawyers, David Roger, Athony Sgro and Alanna Bondy, wrote in their filing.
It’s certainly true that PERS is a fount of inaccurate information. Its history of contribution rate increases is a de facto admission that it can’t accurately calculate what it takes to pay for future benefits. In 2004, the contribution rate for police and fire employees was 28.5 percent. In July, it will rise to 50 percent. Worse, PERS is artificially keeping contribution rates low to avoid political backlash.
But this lawsuit is unlikely to go anywhere. Actuary projections for future decades are necessarily imperfect. In this case, PERS’ analysis appears reasonable. Similar programs in California were axed over cost concerns.
What the union’s lawsuit reveals is the problem with defined-benefit contribution plans. They rest on assumptions — and when those assumptions aren’t accurate, future taxpayers and public employees pay the cost. If the police union wants its employees to have more flexibility in retirement, it should urge the Legislature to pass a hybrid retirement plan.