Billion dollar increase in Nevada’s pension debt will reduce teacher pay, public services

Pension debt is going to take an even bigger chunk out of Nevada’s government budgets in the coming years, forcing cuts in spending that would otherwise go to schools, parks, road repair and public safety.

In 2015, the nearly $1.5 billion that taxpayers sent to PERS consumed more than 10 percent of state and local governments’ combined own-source revenue, which was the second-highest rate nationwide.

But that number is set to increase dramatically beginning in 2019, as a result of today’s decision by the PERS board to slightly pull back the veil that shrouds the true size of the System’s debt.

“While today’s decision by the Public Employees’ Retirement System of Nevada (PERS) is a small step in the right direction, it ultimately highlights a fundamentally broken governance structure that encourages costs to be pushed onto future generations,” said Robert Fellner, transparency research director for the Nevada Policy Research Institute.

“Years of relying on flawed accounting metrics designed to understate the System’s true cost have left today’s public workers and taxpayers holding the bag. This isn’t just unfair, it’s also an incredibly inefficient way to attract and retain talent — particularly teachers,” he added.

Moving closer to acknowledging the true size of PERS debt, said Fellner, means that current public employees and taxpayers will have to pay more in the coming years — while receiving no added benefit of any kind — to bail out the System’s past funding failures.

Future hires will fare the worst, he said.

A 2015 Legislative change designed to stem the state’s exploding retirement costs reduced the PERS benefits that will be offered to most public employees, but only those hired after July 1, 2015.

This means new Nevada teachers will have to pay some of the highest rates in the country to PERS, in order to help fund the much-richer benefits their veteran counterparts are, or will be, receiving.

Unfortunately it’s quite simple, said Fellner: “New hires will have to pay more, while getting less.”

Scholars at the Bureau of Labor Statistics have noted that such a counterproductive compensation structure is almost certain to negatively affect the quality and retention of current teachers.

“To be clear,” Fellner added, “the problem isn’t today’s decision to slightly reduce the degree by which the System’s costs are obscured. The problem is a governance and accounting structure that encourages defraying costs as long as possible, and then dumping those costs onto a generation of taxpayers and public workers who received none of the services.”

Absent fundamental pension reform, he said, today’s scenario is destined to repeat itself in coming years, but with more devastating effects — particularly in the case of a market downturn.

“Left unchecked, Nevada’s pension albatross will continue devouring tax dollars at the expense of other public services like education, public safety and road repair.

“Nevertheless, successful past reforms exist that Nevada lawmakers can learn from,” he said, citing reforms enacted by the federal government as well as more recent examples in Arizona and Utah.

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