Nevada teachers the victims of lawmaker inaction on PERS

By Robert Fellner
  • Wednesday, March 1, 2017

In a just-released analysis of teacher pension plans nationwide, the Public Employees’ Retirement System of Nevada (PERS) failed to receive a single passing mark in the categories of cost, fairness, portability, sustainability or transparency.

Yikes.

The study, Lifting the Pension Fog, from the Educational Counsel and the National Council on Teacher Quality, is just the latest in an avalanche of academic research — which includes studies from the Brookings Institution, the Bureau of Labor Statistics, Cornell University, and the left-leaning Urban Institute — that have found public pension plans like PERS are failing today’s teachers.

Given that the system’s core structure hasn’t changed since 1947, this isn’t terribly surprising.

What is surprising, however, is the depth of the so-called pension fog that has enveloped Nevada policymakers, keeping teachers trapped in a failing system.

Despite the pension crisis receiving national attention — with most of Nevada’s neighbors having already enacted reform or at least actively embracing the conversation — Democratic Senate Majority Leader Aaron Ford proudly declared that reform wouldn’t even be considered here.

Ford reportedly told a local news organization that those seeking to fix the system were “wasting their time,” while describing PERS as “entirely satisfactory.”

Yet, even when measured by the System’s own terms, this isn’t true.

Not a single one of the four objectives outlined in the Retirement Board’s funding policy — becoming fully-funded, ensuring stable costs, spreading those costs fairly and employing a transparent funding policy — has been achieved.

The System has never come close to being fully-funded at any time in its history, with today’s 72 percent funded ratio barely above the level from 30 years ago. Meanwhile, the past decade’s 40 percent cost hike has left new teachers paying national-high rates, while receiving the lowest PERS benefits of any member in over a generation.

And by omitting any reference to PERS record-high $13 billion unfunded liability in recent testimony before the Legislature, the public and lawmakers alike are left with a misleading and incomplete picture of the System’s health.

The confusion over PERS has even infected the local media. A recent Nevada Independent article, for example, mischaracterized the System’s unfunded liability as being the amount the State would have to pay in the event all future debts came due immediately.

The actual cost in that imaginary scenario would be much closer to $100 billion than $13 billion — which has been discounted based on assumed future investment returns.

But that's beside the point. A rising unfunded liability matters because, just like any other form of government debt, it translates to higher costs today. As PERS unfunded liability continues its meteoric rise — up over 600 percent since 1995 — so too does the amount deducted from teachers’ paychecks.

After the amount docked from teachers’ salaries hit a record-high 28 percent of pay in 2015 — an increase which went entirely towards debt, not their own benefit — the topic of teacher complaints dominated numerous PERS board meetings.

Unfortunately, Board Chairman Mark Vincent dismissed these complaints — which merely reflected PERS failure to achieve the Retirement Board’s own policy goals — as meritless, declaring that “teachers are idiots, for the most part,” who are unable to grasp the System’s complexities.

Indeed, Nevada’s pension fog appears to be quite dense — with Vincent lost deep in the middle of it.

This mess all stems from the Legislature having failed to impose proper oversight and funding requirements from the start, an error exacerbated by blindly passing unaffordable enhancements over the years.

When the cost of these enhancements became too large to ignore, public unions gleefully supported slashing benefits for future hires, while still requiring them to pay the same record-high rates as those receiving unreduced benefits — leaving all new hires “net losers” who will receive a retirement benefit worth less than its cost.

This grossly unfair and inefficient compensation structure is likely to “negatively affect current teacher quality and retention,” according to scholars at the Bureau of Labor Statistics.  

It’s time to stop penalizing Nevada educators for the Legislature’s past mistakes. If he’s truly an advocate for teachers, Ford should be doing everything he can to lift the fog around pensions — not proudly contributing to it.

Robert Fellner is the director of transparency research at the Nevada Policy Research Institute. This commentary was originally published in the Las Vegas Review-Journal.


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