Troubled PERS Program Not Beyond Repair

Robert Fellner

Note: This is the third in a three-part series examining the Nevada Public Employees’ Retirement System, or PERS.

Nevada’s troubled Public Employees’ Retirement System currently has an unprecedented level of debt — more than $18 billion.

But the system’s difficulties aren’t insurmountable, provided lawmakers are willing to make some hard decisions instead of simply kicking the problem down the road.

The 2023 legislature should create a new fund exclusively dedicated to paying off PERS’s debt as quickly as possible — and then use some of its massive budget surplus to make an immediate payment towards that end.

This would allow the legislature to create a new retirement system that ensures future contributions are used only for the employees making those contributions, while still funding the PERS benefits already earned for past work.

In fact, there are a variety of reform options available to choose from, all of which would better serve taxpayers and public employees alike.

The retirement plans used by the federal government, as well as those recently adopted in Arizona and Utah, all serve as viable reform templates, both in terms of plan design and as examples of places where unions and reformers were able to come together and find common ground.

A cash-balance plan is another reform option. This approach maintains the same guaranteed lifetime pension structure as PERS but is designed in such a way so that the value of the benefit accrues evenly over an employee’s career.

Adopting a plan of this type would “both increase teacher take-home salaries and offer a more secure retirement” for most teachers, according to a Manhattan Institute study.

A defined-contribution plan, like the retirement plan used by the Nevada System of Higher Education, is another viable reform option. These plans promote flexibility and portability, while protecting taxpayers and public employees from the costs associated with soaring pension debt.

A well-designed hybrid plan is another reform option that would both increase the retirement benefits for most employees while also lowering taxpayer costs in the long run.

Unions previously opposed reform of this type because they mistakenly believed that it would harm public employees. Actually, that plan would have provided most public workers with a benefit more valuable than the one they would receive from PERS.

Indeed, as public employees will be reminded when their PERS rates increase once more this July, it is unions’ misguided opposition to pension reform that is doing the most harm to public employees, who are constantly being forced to pay more, while getting less in return.

Pension reform would ensure that retirees receive everything that they were promised, while finally ending the practice of penalizing current and future employees for PERS’s past funding failures.

It would improve teacher quality and retention by allowing schools to offer more competitive compensation packages at no additional cost to taxpayers. And it would protect taxpayers by getting rid of the broken design structure of PERS that hides costs until it is too late to do anything.

The state’s massive budget surplus makes 2023 the perfect time for reform. Let’s hope the Nevada Legislature takes advantage of this incredible opportunity.

Robert Fellner

Robert Fellner

Vice President

Robert Fellner joined the Nevada Policy Research Institute in December 2013 and currently serves as the Institute’s Vice President. Robert has written extensively on the issue of transparency in government. He has also developed and directed Nevada Policy’s public-interest litigation strategy, which led to two landmark victories before the Nevada Supreme Court. The first resulted in a decision that expanded the public’s right to access government records, while the second led to expanded taxpayer standing for constitutional challenges in Nevada.

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.