Sleight-of-hand, intimidation used to make PERS the nation’s richest plan

For Immediate Release
Contact Robert Fellner, 702-222-0642

LAS VEGAS— A lawmaker received numerous threatening phone calls and emails from Vegas police officers after he suggested a slightly less generous pension enhancement than the one demanded by unions — one of the most shocking findings from a historical analysis documenting how the Public Employees’ Retirement System of Nevada (PERS) grew to become the nation’s richest public pension plan.

“The fact that a lawmaker received threats after proposing an enhancement, albeit one not as rich as demanded, demonstrates how pervasive this culture of union entitlement has become,” said Robert Fellner, director of transparency research at the Nevada Policy Research Institute.

The union’s preferred enhancement ultimately passed, paving the way for one 38-year old to draw an annual $110,804 pension, while working full-time. Given the individual’s age, actuaries project he will receive a total of over $13 million in combined lifetime PERS payouts.

The Nevada Policy Research Institute’s just-released white paper, Footprints: How PERS, step by step, made Nevada government employees some of the nation’s richest,documents how PERS was covertly turned into a government-union gold mine, at taxpayer expense, over the past 40 years.

Government unions repeatedly stormed the Legislature, demanding that short-term investment gains be used to pay for new enhancements, rather than pay down the system’s multi-billion dollar deficit or be saved as security against a future market downturn.

Financially naïve citizen-lawmakers were all too happy to go along, as the enhancements appeared free during their term — allowing them to curry favor with government unions while postponing any cost increases until well after their personal legislative terms ended.

This is one reason why plans like PERS are fundamentally flawed, according to Fellner.

“Public pension plans are inherently opaque, with PERS in a class of its own. By design, the system shrouds cost from public view, pushes those costs onto future generations, and ultimately, exposes both taxpayers and employees to tremendous risk. If properly understood, Nevadans would demand immediate system reform.”

Compounding the problem is a retirement board that consistently exclusively of PERS members — one of only four plans out of 87 major public plans surveyed nationwide to do so. Several current PERS board members are union bosses themselves, and appear earlier in the legislative-sessions records as lobbyists for enhancements, before ending up on the board itself in later years.

Excluding both government employers and taxpayers completely — despite both being stakeholders in PERS — sends a clear message: only plan members’ interests will be represented.

In fact, that is just what has happened, according to Fellner.

“Requiring the PERS board to consist exclusively of plan members reveals the premise underlying the past 40 years of PERS-related legislative history: The system exists to serve government unions, at the expense of both employers and taxpayers.”

Soaring costs

In a recent column, Chuck DeVore of the Texas Public Policy Foundation calculated the cost to pay down Nevada’s pension debt as the 4th-highest nationwide, requiring a 16 percent hike in all state and local taxes for the next 30 years.

Last year’s 2.3 percent investment return means that PERS has failed to hit its investment target over the past 5-, 10-, 15-, 20- and 25-year periods, the first time in history this has happened, and a strong indication that costs will continue to grow.

Footprints concludes by urging the Legislature to adopt reforms similar to those enacted by the federal government and several states — such as Arizona and Utah — and move employees to a defined contribution plan.

“A defined contribution plan benefits government employers and taxpayers by providing complete cost stability and transparency, while providing government employees a fair, sustainable retirement benefit that they can count on,” says Fellner. “The current system, by contrast, exposes retirees to a substantial risk of pension cuts, should we see a serious market downturn in the next 10 years.”

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Media Inquiries

Media inquiries should be directed to Kevin Dietrich, NPRI's Communications Director.
(702) 222-0642