Shining a light on hidden compensation

To the editor:

Frank Geary’s Feb. 1 article, “Public service pays off,” clearly demonstrates the hidden value of a career in public service, as depicted in the story of Henderson’s recently retired police chief, Richard Perkins.

We’ve been hearing outcries from state workers and teachers about frozen salaries and increases in payroll contributions for health insurance. But one of the best-kept secrets that our Nevada civil servants and their political allies don’t want you to know about was unveiled in Mr. Geary’s article.

Pensions are a form of compensation. Think about it this way: An employee is paid $48,000 per year, but $12,000 is deferred and will be paid in the form of a guaranteed stream of income (an annuity) for the life of the employee when the employee reaches a pre-determined age with the requisite number of years of service. So is the employee’s compensation $48,000 or $36,000? Depending on your point of view, the answer will be different.

The point is that any discussion about government compensation needs to at least consider that a good piece of the reward for public service is back-loaded in the form of pensions and retiree health insurance. Thank you to Mr. Geary for bringing this hidden compensation out of the shadows.

Given that Mr. Perkins did make it to retirement, his pension was indeed a form of deferred compensation. Just how much that compensation was worth over his career is eye-opening. Taking the lump sum value of that deferred compensation (estimated to be $1.7 million) and spreading it over his 25 years of service, the city of Henderson gave Mr. Perkins another $68,000 in annual compensation for each year worked that was deferred so that he could receive his $99,400 annual pension.

Mr. Perkins argues that he paid for a good portion of that pension by making a 16.5 percent contribution during his working career. Assuming he was earning $168,000 at retirement, 16.5 percent of that amount is $27,720. For illustrative purposes only, assume he earned $168,000 over his 25-year career and that he contributed the 16.5 percent over those 25 years. His contribution would total $693,000 — about 41 percent of the value of his pension. A private-sector employee participating in a 401(k) plan or contributing to an IRA would need more than $68,000 each year to achieve the same level of benefit.

In addition, the private sector employee bears all of the investment risk. If the markets tumble, the private-sector employee would either have to delay retirement and/or contribute more than $68,000 per year.

Private-sector employers lack the taxing power that governments possess. Unfunded balance sheet liabilities make it more difficult for private companies to access capital. Unfunded liabilities draw the attention of the Department of Labor and Pension Benefit Guaranty Corp. Unfunded liabilities aren’t popular among shareholders.

For all of these reasons, private-sector companies have gotten out of the pension business while state and municipal governments continue to dig a deeper and deeper hole that can be filled only by higher taxes in the future.

Jeffrey Shovlin

HENDERSON

Holy Grail

To the editor:

I find it interesting that the Review-Journal, in its tireless pursuit of smearing all public employees to the point where the citizens of Nevada equate any government worker to Beelzebub, never expresses any real outrage about the blatant abuse and indifference of corporate Wall Street chief executive officers collecting and doling out ridiculous, multimillion-dollar bonuses to each other on the backs of U.S. taxpayers.

While I’m sure the Review-Journal will one day succeed in finding its Holy Grail — the day when all government services in the state are privatized and handed over to the financially responsible, morally upright and just individuals who have boldly captained this economy into the 21st century with wondrous results — I wonder just what the largest newspaper in Nevada will have left to write about.

Aidan Gorman

LAS VEGAS

In the money

To the editor:

It’s time to stop the bamboozling. Our local governments have more than enough money in this recession.

From 1998 to 2008 Clark County’s population grew from about 1.2 million to 1.9 million, an increase of 58 percent. But at the same time, according to the Jan. 30 Review-Journal, Clark County property taxes grew a whopping 258 percent from $649 million to $2.32 billion.

It’s time to put our local leaders on the spot and tell them that they will have to do what the rest of us do: spend within their means. And if they can’t do that, throw them out.

Patrick McKnight

LAS VEGAS

Overpaid losers

To the editor:

In troubled times like these, it is heartwarming to know the Review-Journal is looking out for the little folks who need their help. By sticking up for the “top performers” at “major financial institutions” who are threatened with the loss of “incentives and rewards,” the newspaper’s brain trust truly reveals their agenda (Thursday editorial).

My only question: If these so-called top performers were actually producing positive (profitable) results, why would their institutions require billions of dollars in rescue funds?

The fact is, these greedy incompetents don’t even deserve rewards as meager as the toasters cited by the Review-Journal as insufficient incentives. Better these overpaid losers should leave in a huff over the new performance standards, and the banks can then replace them with hungry, competent executives who are cognizant of the new world in which we all are operating.

Buzz Daly

HENDERSON

Real fallout

To the editor:

I agree with Richard McCord’s letter (“Government ‘creates’ jobs at huge cost,” Wednesday Review-Journal), but there’s more danger to the stimulus bill than just putting an enormous tax burden on future generations — as if generational theft weren’t bad enough.

Hundreds of billions of dollars are budgeted just to pay off the interest on the money we’ll have to borrow (from China, perhaps?) in order to pay for massive new spending programs. To attract this kind of money, interest rates must surely rise. In addition, the federal government will be printing more and more money, which will be in circulation eventually. These two factors will inevitably lead to inflation of the kind we haven’t seen in 30 years.

If you’re old enough to remember 20 percent mortgage rates from the 1970s, you’ll know that inflation is the greatest thief of all, especially for the poor and for those on fixed incomes. If you think we can’t afford the stimulus bill now, just wait two or three years when the real fallout will become apparent.

Ellen Shaw

HENDERSON

Lowering expectations

To the editor:

I’m cringing as I hear Barack Obama say that the economic recovery could take years instead of months. We have put our faith in the Anointed One to lead us out of our hole, and he is giving himself an excuse if in the future his non-stimulus package doesn’t work.

During the campaign he was all about optimism. But now he is playing the political game and lowering expectations for success, thereby giving himself an out. With serious tax cuts to business and getting rid of the foreclosed homes, the problem can be solved.

I sincerely hope that the electorate doesn’t follow him like sheep and fall off a ledge.

Michelle Duncan

LAS VEGAS

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