EDITORIAL: Six-figure pension payouts deep-six taxpayers

There are many complicated reasons why Nevada’s Public Employees’ Retirement System has a massive unfunded liability. But there’s one reason that’s easy to understand — the exorbitant pensions thousands of retirees rake in.

As the Review-Journal’s Eli Segall recently reported, in fiscal year 2023, the number of PERS retirees collecting $100,000 or more was 4,856. In 2019, the number was 2,562. That’s a nearly 90 percent increase in four years. Remember, this is a lifetime benefit.

You can look for yourself. As part of his ongoing transparency initiative, Nevada Controller Andy Matthews recently put pension payments online at checkbook.nv.gov. Just click on the PERS tab at the top of the page.

The number of six-figure retirees will probably continue to soar. One reason is that retirees receive significant post-retirement benefit increases. In years four to six of retirement, the annual bump is 2 percent. In years seven to nine, that goes to 3 percent. In years 10 to 12, it’s 3.5 percent, and it hits 4 percent in years 13 and 14. Fifteen years after retirement, it’s a massive 5 percent. Retirees who first enrolled in PERS in 2010 and later aren’t eligible for the 5 percent bump. If inflation is low, annual increases may be reduced.

Anyone familiar with the power of compound interest can see the future financial stress this places on PERS. That’s especially true because some public safety employees can retire in their late 30s and early 40s. Some can collect six-figure payouts for 40 years or more.

Public employees who started working in 2010 or later do face slightly stricter age and years of service requirements to retire. But even those rules can allow those workers to retire in their 40s or early 50s.

Many government workers recently received substantial pay hikes. Last year, state employees were awarded raises ranging from 10 percent to 13 percent. This year, they received a 4 percent increase. Last year, teachers received a new contract that provided raises of 10 percent and 8 percent.

A retiree’s pension is determined by a formula that includes an employee’s three highest consecutive years of salary. Those raises not only increased pay now, they will hike retirement payouts for decades.

This would be concerning enough if PERS were fully funded. It’s not. The system’s unfunded liability last year topped $18 billion. Its funded ratio was about 75 percent. Last year, it slow-walked a needed contribution increase, apparently worried about public blowback. Efforts to divert new hires into a defined contribution system rather the defined benefit program are dead on arrival in a Democratic-controlled Legislature.

The reluctance to address this problem makes the eventual fix more expensive for future Nevadans. And it will be expensive. Just consider all those generous six-figure pensions, unavailable to the private-sector taxpayers forced to fund them.