Assemblywoman's pension 'fix' akin to pouring gasoline on a fire
By Robert Fellner
March 1, 2018
In trying to come up with ways to tackle Nevada’s soaring pension debt, a key Nevada legislator put forth an idea that is the functional equivalent of trying to put out a fire by dousing it with gasoline.
At last week’s Interim Retirement and Benefits Committee legislative hearing, Assemblywoman and Committee Chair Maggie Carlton made it a point to declare that increasing wages for government workers was a viable way to reduce Nevada’s pension debt.
At the outset, it’s important to remember that the only reason PERS $13 billion unfunded liability matters is because of the massive burden it imposes on the government workers and taxpayers who must pay down this debt.
So suggesting higher wages as a way to reduce Nevada’s pension debt is a bit like recommending that a family struggling with credit card debt take out a lease on a brand new Mercedes — with no real strategy for how that will help other than belief in the phrase, “you’ve got to spend money to make money!”
But it’s actually even worse than that. Because higher wages translate to higher future pension benefits, Nevada governments and taxpayers would get billed twice: as the cost of higher wages is compounded by higher annual pension costs.
So what, if any, reduction in PERS unfunded liability would occur in exchange for increasing both the annual wage and retirement costs of Nevada governments?
Literally, zero dollars — and that’s in the best-case scenario. But more on that later.
Carlton’s genuinely too-good-to-be-true proposal came in response to a presentation by PERS executive officer Tina Leiss.
Leiss was discussing the result of payroll growth having been far below what the System assumed over the past 10 years.
And because PERS sets annual contributions as a percentage of payroll — rather than a level-dollar amount — the lower-than-assumed payroll growth means debt payments coming in below forecasts, which in turn requires levying higher contribution rates on public employees in order to ensure the full, expected dollar amounts are received.
READ MORE HERE