State, local government workers face higher pension premiums

By Cy Ryan

Thursday, Nov. 11, 2010 | 2:05 a.m.

CARSON CITY — The 103,000 state and local government workers and school teachers who are members of the state’s pension fund will be hit with higher monthly premiums starting next July.

On Wednesday, the board of directors of the Nevada Public Employees’ Retirement System approved a 2.25 percent increase in premiums to be shared by governments and their employees.

About 16.4 percent of the 103,000 members are state workers. They face a 1.125 percent increase to bring their contribution rate to 11.87 percent, based on the estimates of the retirement system, says Dana Bilyeu, its executive officer.

The state and its employees share the cost of the retirement system. Bilyeu said the higher premiums will mean the state will have to chip in an additional $8.7 million in each of the next two fiscal years. The higher premium charged state workers will yield a similar additional amount.

Local government employees and school teachers will either have to forego a cost of living increase or take a reduction in salary to achieve the total 2.25 percent increase, Bilyeu said.

The cost will also be shared by the local governments, which negotiate their contracts, an advantage not enjoyed by state workers.

Police officers and firefighters have a separate system, and their rates will be raised by 2.75 percent from its present 37 percent.

The Nevada Policy Research Institute, a non-profit advocacy organization, calls the $10 billion unfunded liability a “ticking time-bomb” that threatens taxpayers.

The system, according to the institute, promises benefits to its members but the money may not be there in the future.

There are presently about 40,000 people drawing pensions.

The institute suggests the goal of an 8 percent return on investment is unrealistic, and it complains the unfunded liability keeps growing.

Bilyeu said, however, that the market value of the assets is $23.7 billion compared to the $10 billion unfunded liability. The system is 70 percent funded. “The change in the unfunded liability doesn’t mean anything in itself,” Bilyeu said.

She also said there was a $372 million gain in the system because the salaries of the public employees were either reduced or did not grow as fast as expected. That means the benefits will be adjusted.

Bilyeu said the system has averaged a 9.3 percent return for 25 years. Last fiscal year, it realized an 11 percent return. For the first quarter of this fiscal year, the system has already exceeded the 8 percent return objective, she said.