Paying for other people’s retirement: half of PERS costs now go to debt

Robert Fellner

Forty seven percent of what teachers and other Nevada public employees send to PERS next year will be spent on the system’s debt, rather than their own, future benefit.

Despite repeated benefit cuts for new hires and a roaring stock market that outperformed expectations, costs for the Public Employees’ Retirement System of Nevada (PERS) are going up yet again.

Next July, PERS contribution rates will increase to 44 percent of pay for police and fire safety officers and 29.75 percent for all other public employees.

This cost increase, like the several that have preceded it, will be spent solely on paying down the system’s debt, which now stands at an all-time high of $14.5 billion.

Debt costs now account for nearly half of what teachers and other public employees must pay to PERS. But because these costs provide no benefit whatsoever to the current employee required to pay them, virtually all will be “net losers,” meaning that they will be required to pay more into the system than they can expect to receive back in future benefits.

To put this in perspective, just the cost of paying down PERS debt, rather than funding their own future benefit, costs the average CCSD teacher nearly $8,000 per year.

This latest PERS cost hike comes at a particularly difficult time, as state and local agencies are currently grappling with a dramatic decline in revenue stemming from the coronavirus pandemic. Governor Sisolak, for example, recently called for state agencies to cut 12 percent across the board. Thus, the rising cost of paying down PERS debt will consume an even larger proportion of tax revenues that would otherwise be spent on public services.

The continual siphoning of tax dollars away from public services is not the only harm associated with paying down PERS past funding failures. These ever-rising costs are also incredibly harmful to public employees hired after 2015.

In 2015, government unions killed a proposed reform that would have greatly improved the benefits received by most public employees, particularly future hires. The unions instead agreed to a plan that would leave the system in place, while cutting benefits for those hired after 2015. While this will reduce costs in about 20-30 years, all those hired in the meantime, as well as taxpayers, will continue to be forced to pay more, while getting less in return.

Consequently, Nevada public employees must now pay the highest PERS rates in the nation, primarily to pay for the much richer benefits received by their veteran colleagues, which were never adequately funded. While teachers have raised complaints over the years as their costs continue to rise, union leadership has appeared unwilling to depart from the status quo.

Given the wildly inaccurate description of PERS that is routinely put forth by the unions, it is unclear whether members favor the current system as it actually works, or if the false narrative that has successfully misled legislators, the media, and even Governor Sisolak has similarly deceived PERS members, too.

To learn more about Nevada PERS, please click here.

Robert Fellner

Robert Fellner

Vice President & Director of Policy

Robert Fellner joined the Nevada Policy Research Institute in December 2013 and currently serves as the Institute’s Vice President and Director of Policy. Robert has written extensively on the issue of transparency in government. He has also conducted legal research and assisted in crafting legal arguments for numerous public records-related lawsuits, including one which prevailed at the Nevada Supreme Court, resulting in a landmark decision that protected and expanded Nevadans’ rights to access and inspect government records.

An expert on government compensation and its impact on taxes, Robert has authored multiple studies on public pay and pensions. He has been published in Business Insider, Forbes.com, the Las Vegas Review-Journal, the Los Angeles Times, the Orange County Register, RealClearPolicy.com, the San Diego Union-Tribune, the Wall Street Journal, the Washington Examiner, ZeroHedge.com and elsewhere.

Robert has lived in Las Vegas since 2005 when he moved to Nevada to become a professional poker player. Robert has had a remarkably successfully poker career including two top 10 World Series of Poker finishes and being ranked #1 in the world at 10/20 Pot-Limit Omaha cash games.

Additionally, his economic analysis on the minimum wage won first place in a 2011 George Mason University essay contest. He also independently organized a successful grassroots media and fundraising effort for a 2012 presidential candidate, before joining the campaign in an official capacity.