Kirner takes the lead on reforming Nevada’s faltering pension system
Officially, Nevada's unfunded pension liability — the difference between assets/future investment earnings and liabilities — is $11.2 billion. If, however, you calculate the liability using fair-market valuation, which is endorsed by the vast majority of professional economists, the unfunded liability is over $40 billion.
For some context, Nevada's state general fund budget each year is just over $3 billion. That's what is known as a big problem, even if it's not a crisis point right now.
Leadership involves acknowledging a problem like this and then proposing a substantive solution for it — even if doing so means taking on a powerful special interest group.
Fortunately, Assemblyman Randy Kirner is up for the challenge.
Gov. Brian Sandoval is taking a measured approach toward changes to Nevada's public employee pension plan, but at least one state lawmaker says action is needed now.
"There are a number of red flags that have popped up for me that are cause for concern, and they should cause anyone in the system today and already retired, concern as well," said second-term Republican Assemblyman Randy Kirner.
The Reno lawmaker has requested a bill for the 2013 legislative session that would significantly alter the current defined benefit pension plan – but only affecting future state and local government employees – to get a handle on a long-term unfunded liability that hit $11.2 billion as of June 30, 2012. The unfunded liability has grown by $1.2 billion over the past two years.
Kirner's bill, which is still being drafted, would create a hybrid plan with about a third of the pension in a defined benefit and two-thirds as a defined contribution. There would also be a contribution aimed at reducing the unfunded liability.
Read the whole article to get a better sense of how important it is to fix this issue now, instead of kicking the can down the road.
While we'll have to wait until the bill is drafted to examine the plan in detail, a hybrid pension system is already in place in Utah.
And what happens if a government lets unfunded pension liabilities spiral out of control? This.