By Robert Fellner
Nevada teachers are paying more to bail out their share of the nation’s combined $1.75 trillion in public pension debt than teachers in any other state, according to a just-released study by Manhattan Institute Senior Fellow Josh B. McGee.
In Feeling the Squeeze: Pension Costs Are Crowding Out Education Spending, McGee documents how rising pension costs have siphoned resources from vitally needed education services, particularly teachers’ salaries and retirement benefits.
Nationally, McGee found that “teachers earned retirement benefits worth about 1.01% of payroll less in 2015 than in 2005” as states reduced the size of retirement benefits offered to new hires in an attempt to slow down the growth of pension debt. Nevada teachers, however, saw their retirement benefits reduced by an amount worth 14.07% of total payroll — which was the largest reduction experienced by teachers of any state.
As the below chart makes clear, Nevada teachers are paying PERS more, while getting much less in return.
McGee correctly pins the blame for this inequity on irresponsible benefit enhancements that were passed in earlier years, without properly accounting for their added cost.
The particulars of Nevada’s experiences with these types of enhancements — which occurred incrementally during the 1990s before ultimately culminating with the 2001 Senate Bill 349 — can be found here.
PERS itself had lobbied on behalf of those enhancements in the past — with former CEO George Pyne advocating for the now universally-reviled practice of using short-term investment gains to pay for enhancements, as opposed to saving for the inevitable market downturn.
Today, however, even current CEO Tina Leiss has correctly warned the Board to be wary of any requests for new enhancements, citing their potential to carry unanticipated additional costs.
McGee concludes by stressing just how devastating these costs can be:
“Now the cost of paying for legacy-benefit promises to teachers for work in yesterday’s classrooms is crowding out the salaries and benefits of teachers entering classroom todays, with potentially negative implications for students.”
The full study can be downloaded from the Manhattan Institute’s website here.
For NPRI’s analyses of the Nevada PERS situation, visit: http://www.npri.org/issues/detail/pers
Robert Fellner is the director of transparency for the Nevada Policy Research Institute, a nonpartisan, free-market think tank.