Nevada Lawmaker Renews Fight for Public Pension Reform

Published January 26, 2015

As the gap between public pension liabilities and actual fund assets widens, a Nevada lawmaker is redoubling his efforts to defuse a ticking fiscal time bomb in the state.

For several years, State Rep. Randy Kirner (R-Reno) has tried to reform the Nevada Public Employees’ Retirement System (NVPERS) by moving some of the $12 billion entitlement program from a defined-benefit system to a defined-contribution system, similar to those enjoyed by private-sector employees.

Nevada Democrats blocked Kirner’s past pension reform efforts. After the November 2014 midterm elections, however, Kirner’s party now holds the majority of seats in each house of the state General Assembly, finally giving Kirner’s reform bill a fighting chance.

Accounting Gimmicks

NVPERS claims to be able to pay 70 percent of promised liabilities to state employees, but its estimate assume NVPERS investment funds will grow by 8.0 percent per year. NVPERS estimates its unfunded liabilities exceed $12 billion, adding $4,345 in debt for every taxpayer in the state.

In November 2014, however, State Budget Solutions (SBS)—a nonpartisan public policy organization focusing on local and state budget issues—examined public pension programs in all 50 states, finding NVPERS is underestimating the severity of its situation.

According to SBS’ calculations, for every $3 in pension promises made by Nevada PERS, the public pension program can pay only $1 in benefits to state retirees, when using financially realistic assumptions. In other words, every state taxpayer has been left with the responsibility for about $21,472 per person in liabilities, likely in the form of additional taxes.

‘Hybrid Plan’

Kirner proposes a hybrid plan to keep the unfunded liabilities from increasing further.

“The aim of the bill is to put the brakes on a growing unfunded liability, currently at over $12 billion, with 100,000 active contributors and 50,000 beneficiaries,” he told Budget & Tax News. “Another aim of the bill is to recognize public sector employees in today’s workplace do not spend a career in public service and want portability.”

“The plan’s design is a hybrid plan. A portion of the plan will remain a defined benefit, and a portion will be a defined contribution,” Kirner explained. “The defined-benefit portion would not be subject to collective bargaining, and employees would contribute to the program.

“In theory, they do contribute, but—in practice—the unions negotiated, decades ago, for the governmental agency to pay, in lieu of salary increases. These negotiations occurred during tough times, but since those long-ago days, salaries have crept up,” he said.

Alexander Anton ([email protected]) writes from Palatine, Illinois.

Internet Info:

“Retiring in the Lap of Luxury,” Victor Joecks and Robert Fellner, Nevada Policy Research Institute,