Sounding the alarm on pension reform

Just in time for the start of the 2015 Legislature, outgoing Clark County Fire Chief Bertral Washington is helping to make the case for major public employee pension reforms.

Washington is retiring Friday after a little more than four years as leader of the Clark County Fire Department. But he’s not headed into retirement at age 43. On Dec. 15, he’ll begin work as chief for the Pasadena, Calif., Fire Department. The city’s website says the job’s salary range is between $182,757.54 and $228,447.02 per year.

But he’ll take home more than that because, under the rules that govern the generous benefits paid by the Nevada Public Employees Retirement System, Washington can collect his guaranteed-for-life Nevada pension, even though he hasn’t really retired.

How can Washington collect a pension at such a young age, when he’s clearly in the prime of his career and still working?

Nevada public safety workers can begin collecting their pensions at any age after they put in 25 years of service. But that doesn’t mean they actually have to work for 25 years. Nevada government employees can purchase up to five years of service credit at a cost of roughly one-third their current annual salary per year. Washington worked for the Las Vegas Fire Department for 16 years before taking the job with Clark County, giving him 20 total years of service credit.

I tried to ask Washington, through the county’s communications office, whether he has bought five years of service credit, but didn’t get an answer. But it’s a safe bet that he has — he’d be a fool to leave the state without doing so. With only 20 years of actual service, Washington, at 43, would not be able to start collecting his pension until age 50 — and his pension would be reduced. Buying the five years of credit not only gets Washington a full pension, it allows him to begin drawing the pension seven years sooner than he otherwise would have.

Washington’s base annual salary as county fire chief is about $143,000. Let’s say Washington planned poorly and bought his service credit as fire chief, instead of as city firefighter, when his salary was lower. Buying five years of service as chief would cost him about $240,000. But the seven years worth of benefits he otherwise would not have received will be worth more than $700,000. (His pension benefit likely will be north of $100,000 per year.)

In the private investment markets, turning $240,000 into $700,000 in seven years requires extreme financial risks. But PERS delivers such payouts on a routine basis. Public employees can purchase service credits with a lump sum or through payroll deductions.

No wonder PERS has an unfunded liability in the tens of billions of dollars. Taxpayers, not the “retired” public employees who collect benefits, will get the bill for any promised pensions that can’t be paid. We’re the backstop.

Washington is doing what countless other government workers have done before him. PERS isn’t a safety net for old age, it’s a wealth generation system that provides workers with huge incentives to quit at a young age and continue working elsewhere. Washington couldn’t collect his pension if he became fire chief in, say, Reno. So he’s leaving the state. He’ll cash his Nevada pension checks in California. And, after a time, he’ll quit there and start collecting a California pension as well.

Service purchases are a ripoff of epic scale. And no one — no one — should be able to collect a public pension at age 43.

The Legislature needs to rein in this racket. It should move future hires into a new retirement system that shifts risks from the public to the employees. It should establish a minimum retirement age, of at least 62, before any benefits can be collected. It should bar the payment of benefits to anyone still working. And it should end service purchases at once.

Taxpayers can barely afford to save for their own retirements. Important public services are being squeezed by rising contributions to the PERS pension fund. And the public likely will be asked to pay even higher taxes next year.

Not without pension reform.

Glenn Cook (gcook@reviewjournal.com) is the Las Vegas Review-Journal’s senior editorial writer. Follow him on Twitter: @Glenn_CookNV.