PERS response to NPRI pension study confirms accuracy of its analysis
Last week, my colleague Robert Fellner and I released a study that compared the pensions of recent full-career government employee retirees with their final year of base pay.
What we found was shocking. For local government employees with 30 years of service credit or more, the average government retiree made more in yearly pension payouts than in their final year of base pay. For just police and fire employees, the average jumped to 114 percent.
When confronted with information like this, PERS had three options. First, it could acknowledge the study’s findings are accurate. Since PERS officials have a vested interest in downplaying the severity of PERS’ unfunded liability and declining investment returns that was unlikely.
Second, it could have pointed out factual errors in the study.
But it did neither of those things. Instead, it chose option three: Change the subject. Spin, spin, spin. PERS officials have a lot of experience with that.
Which is expected, and I’ll address their spin in a moment. But first, it’s important to point out that PERS has identified no factual errors in NPRI’s report, which relied heavily on information from PERS itself.
Instead, PERS officials are trying to change the subject in two ways. First, PERS administrators claim that NPRI’s study only covers a small portion of retirees or in the words of PERS executive officer Tina Leiss, “It appears that the analysis was based on a review of 790 retirees whereas there are currently 49,179 retirees.”
While that’s true, it also misses the point. We limited the study to recent retirees for two reasons. First, we needed to have corresponding salary data, and the oldest records on Transparent Nevada are from 2007. For some of the agencies we looked at, the first year of salary data available on Transparent Nevada is 2009.
Second, and more importantly, we wanted to exclude older pensions that could include numerous cost of living adjustments. Because the payout data PERS makes available doesn’t separate base pension amounts from COLAs, a pension that today is paying out $100,000 a year to a 2008 retiree could have started off as a $90,000 pension in 2008.
So we excluded older retirees in order to not compare base pay with pensions that included numerous COLAs. Doing so would have inflated the findings.
If PERS would like to provide better data, we’d be happy to run a more detailed analysis, but PERS has a history of fighting public records requests.
Leiss than acknowledged that for the past three years around 12 percent of retirees have 30 years of service credit.
Leiss’ acknowledgement highlights the inequity in the current defined-benefit system. If you are one of the 12 percent who retire with 30 years of service credit, the system provides extraordinarily high benefits immediately, as our study shows. But if you only work for government for five or 10 years, PERS is a rip off. If you work for a local government for less than five years, you get nothing if you leave government employment.
That’s why NPRI recommends a pension system that is personal and portable.
The second argument PERS is making involves the “cap” that limits pensions to 75 percent of average compensation for employees hired after 1985. For government employees hired before 1985, the cap is 90 percent.
If you take the time to read the study, you’ll find that we address this on page 5. In short, the cap sounds nice, but is largely meaningless in practice, which is why employees under the 90 percent cap, are taking home pensions worth 110 percent, 120 percent or more of their base pay in pension payouts.
PERS has a huge math problem, and the legal income-replacement-level pensions identified in NPRI’s study are a big part of that. The first step to fixing this math problem is acknowledging the math.
While PERS officials appear committed to ignoring this reality, I’m optimistic that most lawmakers feel differently.
Victor Joecks is executive vice president at the Nevada Policy Research Institute and oversees the execution of NPRI’s strategic plan and policy initiatives. He joined the Institute in 2009 and previously served as its communication director. Under his leadership, NPRI obtained record amounts of state and national media coverage.