Buoyed by recent exposés about retirees “double-dipping” on the public’s dime, critics of Nevada’s pension system now express hope for a groundswell of taxpayer support for reforming the system.
About 700 state employees have taken advantage of a 2001 law allowing state retirees to return to jobs in the public sector deemed difficult to fill, reported the Reno Gazette-Journal. And the Las Vegas Review Journal pegged the cost of such income boosts at $23 million annually.
Critics say the program is unfair because the pension system’s legislative mandate is simply to help those whose earning power has been substantially reduced by age or disability, rather than a gateway to a six-figure income.
The practice also tends to limit the number of young workers who come into the system – whose contributions are needed to help sustain the pension system over time, critics say.
“And because of our pension system’s hostility to transparency, we don’t really know the scope of what’s going on,” Robert Fellner, transparency director at the Nevada Policy Research Institute, told Watchdog.org.
The Nevada Public Employees’ Retirement System (PERS) has the 10th largest pension debt of any state, the state pays $1.6 billion annually into the system and benefits for new hires have been slashed to prop up the system, Fellner said.
“Taxpayers and public employees are getting the shaft,” he said.
Not all of the recent headlines about the Nevada PERS have been critical, however. PERS reported this month that its 2017 fiscal year return on investments was in the double-digit range – 11.8 percent. That’s a sizable gain over the 2.3 percent return in 2016 .
And the president of the Nevada Taxpayers Association, Cheryl Blomstrom, sees the “double-dipping” label as unfair because some public agencies, such as the Clark County School District, are struggling to fill gaping personnel holes, such as math and science instruction. Without the hiring of the seasoned retirees, students there could be stuck with long-term substitutes who don’t meet their needs, according to Blomstrom.
“I don’t think it is a blanket problem,” she said.
Hiring back retirees allows a school district not to have to spend on training costs, and the specific requirements of the law tend to limit its use for teachers and others with in-demand special knowledge and capabilities, Blomstrom said.
She acknowledged that there may be instances of abuses in the practice.
“It needs to be looked at on a case-by-case basis,” she said, adding that legislation might be needed.
The state’s top financial officer, Controller Ron Knecht, however, sees the double-dipping issue as serious, though still secondary to the concerns about the pension system’s overall financial sustainability.
“It was never intended to operate the way it does,” Knecht told Watchdog.org, adding that those who draw state pensions should only be allowed to return to state positions in very rare circumstances. “It creates a perception problem, and it’s a real problem in terms of fairness.”
You can point to about 10 egregious cases of double dipping currently in Nevada, he said.
With the state retirement system, taxpayers split contributions into the system 50-50 with the workers, according to Knecht, but local public agencies often foot the full pension burden through a loophole the controller would like to see closed.
“The whole system is being run for and by the late-career and retired folks,” Knecht said.
The legislature, meanwhile, is not addressing the issue of pension liabilities in the state because many state lawmakers do the bidding of teachers union management, according to the controller.
Several state lawmakers did not respond to queries about the pension system when contacted by Watchdog.org.
Numerous long-term issues plague the pension system, including PERS’ reliance on an 8 percent rate of return on investments, he said. A more realistic rate of return would be 5 percent per year, but using the lower figure would put system underfunding at 53 percent instead of the current estimate of 23 percent underfunding, according to Knecht.
“The PERS board wears rose-colored glasses when forecasting returns on investments …” he said. “Unless they do something quick about that, that will be a hole that will be very difficult to climb out of.”
Knecht also criticizes PERS for overestimating the number of public employees entering the system annually and for relying on outdated demographic statistics that fail to reflect people living longer.
Fellner and the Policy Research Institute fault the system for allowing a number of eyebrow-raising cases, including a former police lieutenant who began drawing a six-figure pension at age 38.
“Short-sighted legislators passed extraordinary enhancements whose costs will take decades to unwind,” Fellner said. “Today’s workforce is now required to pay for these mistakes in the form of larger payroll deductions and reduced benefits.”