Unsustainable salaries become unsustainable: Reno edition

Thirty-five Reno firefighters and their families, as well as all city residents, are about to experience the pain that is the inevitable result of unsustainable salary and benefit increases.

Today, the Reno Gazette-Journal reports that the City of Reno is preparing to lay off 35 firefighters and begin part-time closures of three fire stations because it did not receive a federal grant that would have covered its burgeoning costs.

In response, City Manager Andrew Clinger said, "We knew this was a possibility, and we've been working on a restructuring plan for some time to ensure the continued safety of our citizens."

Unfortunately, Nevada’s collective bargaining law makes the most obvious restructuring plan, reducing inflated compensation, difficult to impossible. And firefighter compensation is quite high in Reno.

In 2012, the last year for which data is available, 12 of the 286 people employed by the department took home over $200,000 in salary and benefits. Sixty-three made over $150,000, and nearly everyone made over $100,000.

All compensation data can be found at TransparentNevada.com, but here’s a snapshot of what some of the department’s brass received in total compensation in 2012:

  • Paul Keckley, a fire battalion chief, took home $280,358.08.
  • Frederick Kajans, fire battalion chief, took home $278,006.88.
  • William Munns, fire battalion chief, took home $259,973.88.
  • Timothy O’Brien, fire battalion chief, took home $257,120.78.
  • Dana Tucker, fire battalion chief, took home $251,971.72.

Considering the median combined household income in Reno is $47,814, the salaries — even the $100,000-plus ones — are extravagant.

Public employee compensation packages are severely inequitable with the private sector, and as made evident by Reno’s latest move, are unsustainable. If the department’s unions refuse to compromise and the legislature fails to modify or eliminate the collective bargaining law, the only thing residents and employees have to look forward to in the future are similar cuts to city services. 

The 35 firefighters who will be laid off didn’t create the glaring systemic problems within the department’s budget — collective bargaining had the biggest role in that — but they and the citizens who experience slower response times and lesser service will be its victims.

Let’s hope state lawmakers are learning from Reno and North Las Vegas and will make changes next session that allow cities to make significant long-term changes to their employee costs.

 

Truth about the Texas margin tax

Every week, NPRI President Andy Matthews writes a column for NPRI's week-in-review email. If you are not getting our emails, which contain our latest commentaries and news stories, you can sign up here to receive them.


Truth about the Texas margin tax

It’s not often voters get a trial run before they sign off on a new tax, policy or program.

A lot of the time, the actual impact of a ballot measure isn’t known until it is implemented, or even years later.

Fortunately for Nevada voters, we don’t have to guess or speculate about what will happen if the margin tax passes this November: All we must do is look to Texas.

Texas enacted a margin tax in 2008, becoming the first and only state in the union to implement this particular type of gross-receipts tax. Now, a move is under way to repeal that tax, which hurts small and family-owned businesses, creates a paperwork nightmare for businesses and has for years prevented Texas from reaching its full economic potential.

Since its implementation, the margin tax has forced businesses to scale back production, cut pay and benefits, raise prices, lay off workers and even close their doors. Many companies saw their tax burden increase tenfold under the margin tax, and thousands of Texans have lost jobs as a result of the tax.

After the tax was enacted, Texas’ business-tax-climate rank dropped from seventh to 13th best in the nation, reducing the Lone Star State’s competitive advantage.

And for all of the pain the tax has caused families, the Texas margin tax has brought in billions less in revenue than projected.

Supporters of the Nevada proposal — which would impose a margin tax rate two-to-four-times higher than that in Texas — dismiss the problems Texas has had with the margin tax and instead point to the state’s economy, which is booming in comparison to Nevada’s. While it’s true Texas has flourished in recent years, it’s not because of the margin tax, but in spite of it.

Unlike in Nevada, where nearly 85 percent of the land is federally owned, very little of Texas is owned by the federal government, meaning Texas’ land and resources are available for private citizens to use, creating jobs and economic growth. Additionally, Texas’ oil resources give it an economic boost, it has less business red tape than Nevada, it has relatively cheap energy and has a minimum wage at the federal rate.

Several studies have explored the idea of changing or repealing the tax and found that repealing it would create 41,500 net new jobs within a matter of years, add $3.4 billion in net new investment and increase personal, disposable income by $9.8 billion.

State Sen. Craig Estes is one of the many Texans to recognize the benefit of ridding the state of this destructive tax, so he has introduced a bill to repeal it. Hoping to educate Nevadans about what a margin tax means for a state’s economy, the senator is coming to the Silver State next month to give talks in Las Vegas and Reno.

As voters consider Texas’ margin-tax mistake, it’s important to understand the economic implications of such a move. I hope you’ll take a couple hours out of your day on May 13 if you’re near Las Vegas or May 14 if you’re in the Reno area, to join us in listening to the insights Sen. Estes has to offer.

And congratulations to “fsdnevada,” who is leading our NCAA bracket challenge this week!

Thanks for reading and have a wonderful weekend.

Andy Matthews
NPRI President


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Flores implies margin tax is not fair, equitable or sustainable

When you’re right, you’re right. And in detailing some of the problems with the margin tax, Lt. Gov. candidate Lucy Flores is spot on.

On Tuesday, asked via email by the Review-Journal to clarify her position (on the margin tax), Flores wrote:

“I mean that it’s not the solution that I favor,” she said. “I prefer a broad-based approach — one that is fair, equitable and sustainable.”

So let’s see.

The margin tax would greatly impact some industries more than others. For instance, in Texas, law firms can deduct more of their expenses than can farmers. So farmers end up paying proportionally more of the tax than lawyers. That’s not fair or equitable.

The margin tax also hits business that are losing money. That’s not sustainable.

I couldn’t agree more with Assemblywoman Flores. The margin tax isn’t fair, equitable or sustainable.

Unfortunately, there are even more problems with the margin tax than that, but it’s great to see the candidate at the top of the Democrat’s 2014 ballot spelling out for voters the many problems of this proposed tax increase.

 

Public retirement in Nevada

It's the best in the U.S.

A new study by the American Enterprise Institute shows Nevada's public retirees reap the best benefits in the entire nation. And, the study doesn't consider the benefits of public-safety retirees, which are exorbitant.

Key take-aways from the study:

 

Providing perspective on Nevada’s education funding

Over the weekend, liberal pundit Jon Ralston decried Nevada’s level of education funding in a post entitled, “Las Vegas Perspective lacks ... perspective.”

Nevertheless, [Jeremy] Aguero praised Gov. Brian Sandoval for “making education a priority.” (To be fair, first lady Kathleen Sandoval spoke after him….)

But has he? Yes, he restored half a billion dollars in 2013. But spending is still well below other states, and many of those in the audience support infusing more money but can’t agree on how to fund it.

This is the typical liberal dichotomy: You either support education by wanting to spend more or you oppose education if you don’t want to dramatically increase spending.

But it’s a false dichotomy, because there is little to no correlation between spending and student achievement.

Cato education scholar Andrew Coulson provides some needed perspective on Nevada’s education funding and how it relates to student achievement.

The question isn’t why hasn’t Nevada dramatically increased education spending, but why is no one being held accountable for Nevada’s dramatic increase in education spending while education outcomes have decreased?

Nevada’s far from alone in failing to turn significant education spending increases into higher student achievement. Here’s Massachusetts, the state with the highest ACT scores in the country.

So if spending more doesn’t work — and it hasn’t for 50 years and for 50 states — what should Nevada do?

Implement school choice. School choice, whether through ESAs, tuition tax credits, opportunity scholarships or vouchers, provides a proven way to increase student achievement.

Twenty-three states and Washington, D.C., have some form of school choice, and students in those states have seen their test scores and graduation rates increase. What’s amazing is that the test scores in public schools have increased after school choice began in these states.

So do conservatives and libertarians have proven solutions to Nevada’s education problems? Yes, we sure do.

And after 50 years of trying it the liberal way, Nevada’s students — your children and mine — need school choice to actually increase their achievement, instead of just spending more.

 

The Silver State’s golden compensation packages

Every week, NPRI President Andy Matthews writes a column for NPRI's week-in-review email. If you are not getting our emails, which contain our latest commentaries and news stories, you can sign up here to receive them.


The Silver State’s golden compensation packages

Whether you’re a current government employee or a retired one, Nevada is the place to be.

That’s because Nevada public employees take a lot from taxpayers — both when they’re working and after they retire.

A quick glance at TransparentNevada.com illustrates this point when it comes to individual employees. But now, new data provides the big-picture perspective on what Nevada is paying for both current and retired public workers.

Last month, Nevada Journal reported on new data from the Bureau of Labor Statistics that shows Nevada’s public-school employees are faring much better financially, compared to their peers in other states, than are Nevadans working in the private sector. Additionally, the American Enterprise Institute just released a study showing that the Silver State has the highest public retiree pension benefits in the country.

Let’s start with Nevada’s education sector. In 2012 — the latest year for which data is available — the average annual income for someone working in Nevada’s K-12 public-school sector was 103.4 percent of the average wage for public-school workers nationally. Meanwhile, Nevadans working in the private sector took in only 86.2 percent of what their counterparts across the nation did.

That 17.2-point gap is the fourth-highest differential in the country.

When compared to their counterparts in neighboring states, Nevada’s public-school employees are doing even better. In Arizona, for example, those working in the private sector brought home 91.9 percent of the national average, while education employees made 83.6 percent of the national average for their sector.

The same is true in California, Idaho and Utah, where those in the private sector fared better compared to their peers than those in the public-school sector.

In retirement, Nevada’s public-sector workers are also living the high life. Andrew Biggs, former principal deputy commissioner of the Social Security Administration and the speaker at NPRI’s November 2011 policy luncheon, authored a study this month that shows Nevada offers the most generous retirement benefits in the entire nation.

On average, Nevada retirees bring in more than $64,000 each year. That means the average public retiree is poised to take home $1.33 million over the course of retirement, not including the value of his or her health care benefits.

Our retirees make so much that their annual income exceeds that of 87 percent of Nevadans who are currently working full-time. The only states for which that percentage is higher are Oregon, North Carolina and West Virginia.

And Biggs’ study doesn’t factor in public-safety retirees, who tend to retire earlier and receive higher pensions than other government workers.

Public-employee unions and supporters would have you believe salaries and pensions are modest. But a quick look at the data shows otherwise.

You know who shouldn’t be modest? The leader in NPRI’s bracket challenge: Joy Juedes.

Thanks for reading and have a great weekend!

Andy Matthews
NPRI President


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Union boss making $192K ready to push North Las Vegas off solvency cliff

For years, NPRI has noted that collective bargaining agreements that give unsustainable increases in pay and benefits to public employees are, well, unsustainable.

When the economy and hence tax revenue goes up and down, Nevada’s collective bargaining law allows local government unions to extract massive pay and benefit increases in the good times, while preventing decreases in the down years. It’s a ratchet effect, and the inevitable end game is playing out right now in the City of North Las Vegas.

Nevada’s economic downturn hit North Las Vegas residents especially hard and consequently tax revenues plummeted. Instead of reducing inflated government employee salaries, the union contracts mandated the city give employees raises. In 2012, the city officials tried to declare a state of emergency to prevent giving $25 million in pay increases to its employees. A judge ruled city officials couldn’t do that and now they’re on the hook for $25 million worth of back pay raises.

The nearly insolvent city offered a $7.7 million settlement to workers. The city’s backup plan is to make 10- to 20-percent across-the-board spending cuts, which will mean layoffs.

Union officials aren’t happy with either option. They want pay increases from the near-bankrupt city and, at this point, the option they’re supporting would try and squeeze it out of taxpayers.

The Las Vegas Review-Journal explains:

Plan C — receivership, the state’s broadly untested alternative to municipal bankruptcy. Under receivership, a team of state-appointed financial experts would have the power to increase property taxes and negotiate future, but not existing, union contracts. Faced with a choice between plans A and B, two of the four city union heads said they would just prefer Plan C — receivership, the state’s broadly untested alternative to municipal bankruptcy. Under receivership, a team of state-appointed financial experts would have the power to increase property taxes and negotiate future, but not existing, union contracts.

“If these are the tactics the city’s going to use, I think it’s time for the state to step in,” North Las Vegas Firefighters Association President Jeff Hurley said. “You’ve heard me before, I’ve gone to bat for the mayor, but right now I’m disappointed. ... There was just no reason to go this far.”

In 2012, Hurley took home $192,414. What could be disappointing about that?

Well maybe he’s upset that 100 of his colleagues had larger compensation packages in 2012, including police lieutenant Anthony M DiMauro, who received a whopping $408,387.82 in 2012.

Six-digit compensation packages are hardly outliers, and the excessive pay isn’t limited to public safety personnel. A total of 850 employees in North Las Vegas made more than $100,000.

Remember, union bosses, like Hurley, are ready to make North Las Vegas insolvent, not to keep their pay steady, but for pay increases!

Yesterday, Geoffrey Lawrence, NPRI’s deputy policy director laid out the short term solution: a special session to allow municipal bankruptcy.

State receivership basically allows the Department of Taxation to appoint a financial overseer to negotiate contracts on the city’s behalf and implement a debt-reduction plan through both tax increases and spending reductions.  Such receivership was last implemented for rural Storey County, but no local government of the size of North Las Vegas has ever undergone the process.  Furthermore, the state overseer lacks authority to suspend or modify existing union contracts or debt obligations.  As one state tax official told the Committee on Local Government Finance, “It’s no guarantee that structural deficits can be overcome.”

Sometimes, however, it is necessary for governments — just like businesses and individuals — to renegotiate their debt and structure it along different terms. This is why federal law allows municipalities to enter into a bankruptcy protection proceeding.  Chapter 9 municipal bankruptcy allows a municipality’s representatives to confront city contractors and creditors and present to court officials their finances so the court can determine what a city can realistically afford to pay and amend the contracts accordingly.

North Las Vegas is about to go under because its unions, not its elected officials, have the most power over its finances.

The long-term solution to that problem is legislation to reform or eliminate Nevada’s local government collective bargaining laws. 

 

Health of NV private sector lags behind public school sector

 

Sour Sixteen

Every week, NPRI President Andy Matthews writes a column for NPRI's week-in-review email. If you are not getting our emails, which contain our latest commentaries and news stories, you can sign up here to receive them.


Sour Sixteen

This weekend, the field of 64 NCAA basketball teams chasing the national title will be narrowed down to The Sweet Sixteen.

Coincidentally, this weekend also marks the fourth anniversary of Obamacare. It’s hard to believe that it’s only been four years since President Obama signed this disastrous bill into law, given all the things that have gone horribly, horribly wrong.

Nevada hasn’t been immune to the Obamacare horrors, whether Sen. Harry Reid wants to believe it or not. This week, the state awarded a $1.5 million contract to a consulting company hired to help Xerox fix the failed Nevada exchange website that has already cost taxpayers nearly $84 million. This comes just two days after the story of 62-year-old Larry Basich — who has been paying into the exchange since November but was left with $407,000 in medical bills because the system didn’t place him with the right insurance company — came to light.

And who could forget the history-making battle between the Obama administration and the Culinary Union, which has recently lambasted Obamacare publicly?

As I mentioned earlier this week, the White House tried to use the NCAA tournament to garner more support for its failing legislation by encouraging people to make their own March Madness picks. But, instead of choosing winning college basketball teams, the White House wants you to choose the “16 sweetest reasons to get covered.”

I tried. I looked through the silly cat memes and the slap-stick GIFs that have absolutely nothing to do with Obamacare. But I just couldn’t see a winner in this terrible law.

So, in celebration of Obamacare’s birthday and its latest marketing gimmick, I decided to create my own version of the ACA bracket. It’s a list of the 16 worst things about Obamacare, and I call it the “Sour Sixteen.”

  1. When PolitiFact named Obama’s promise, “If you like your health care plan, you can keep it,” the Lie of the Year
  2. That time Harry Reid said “all” Obamacare horror stories are untrue
  1. That it has been changed nearly three dozen times, with more than half of those changes coming directly from the administration
  2. That it will cause 2.5 million workers to leave the workforce over the next decade, and that the left said this is a good thing because it frees people from “job-lock”
  3. That it caused more than 6 million Americans to lose their health insurance
  4. That the average Obamacare insurance premium in Nevada will be 179 percent higher than residents’ pre-Obamacare rates
  5. When Harry Reid became the only top congressional leader to exempt some of his staff from the law
  6. When the Nevada man mentioned above was left with a $407,000 hospital bill after the Nevada Obamacare exchange had no record of his coverage, which he had been paying into for months
  7. The rollout
  8. All those times Harry Reid promised America: “If you like the coverage you have, you can keep it”
  9. When Nancy Pelosi justified passing it by saying, “We have to pass the bill so that you can find out what is in it”
  10. How it will increase costs for most small businesses
  11. Predictions that Obamacare premiums will skyrocket in the coming months
  12. How it discourages business growth through a litany of new costs and regulations
  13. The way it expands Medicaid and increases the use of emergency care
  14. How the law encourages adults to embrace child-like dependence #Brosurance #PajamaBoy

Hopefully, my NCAA picks in NPRI’s bracket challenge will turn out to be a little sweeter than the items on that list (though my track record from recent years makes me seriously doubt it).

Speaking of which, congrats to “B Land,” who’s currently leading the field in NPRI’s tournament challenge.

Have a great weekend, and good luck with your picks!

Andy Matthews
NPRI President


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Big Pensions, Big Questions

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Total Records: 1818

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