Commentary

Lance Christensen’s testimony on Assembly Bill 190 (Kirner) in Nevada Assembly Committee on Government Affairs on March 3, 2015

Pension costs are a major problem for states and municipalities’ balance sheets throughout the country. Indeed, Nevada faces challenges with its pension system. According to the latest Public Employees’ Retirement System of Nevada (NVPERS) actuarial valuation report, the plan is 71% funded for the Regular employees and 74% for the Police and Fire, with $10.1 billion and $2.3 billion unfunded actuarial liabilities, respectively.

NVPERS regularly predicts an 8% rate of return, but in looking over the last 10 year average, the plans – both the Regular and Public Safety – have averaged only a 6.22% actuarial average. Lower than expected returns are significant when considering that, when dealing with investments, investors are also dealing with compound interest. If there are steep losses one year, it requires more than simply meeting the planned rate the year after – NVPERS must make up the lost ground from the previous year as well as hit the coming year’s investment goals.

Given the current trajectory of the system and the massive liabilities and financial risks they pose to the state, it is past time to reform the pension system in Nevada to make it more sustainable. It took years to get into this problem and it is going to years to dig out of the problem; Nevada must start now. AB 190 represents an important start to that process by placing Nevada on a fiscally sound path for retirement security that is fair for both public employees and taxpayers.

To read the full testimony, go here.

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