National study finds Nevada pension costs are crowding-out education spending

Good Governance

| October 18, 2016

A study released today from one of the nation’s top public pension experts, Manhattan Institute Senior Fellow Josh B. McGee, documents how soaring pension costs are crowding out spending on educational services at public schools nationwide.

The study, Feeling the Squeeze: Pension Costs Are Crowding Out Education Spending, highlights Nevada as one of only eight states that have “experienced the double whammy of declining per-pupil expenditures and growing pension contributions” over the 2000-2013 time period surveyed.

Nevada per-pupil educational spending declined 13 percent while pension contributions grew 16 percent. In dollar terms, per-pupil pension contributions increased by $195 while education expenditures declined by $1,259.

McGee notes that the two areas that appear to suffer the most from rising pension costs are, ironically, teacher salaries and retirement benefits.

This finding is consistent with previous NPRI reports — see here and here — that those losing the most from the Public Employees’ Retirement System of Nevada (PERS) are recent and future teachers themselves.

While per-pupil spending on teacher salaries increased 2 percent nationally, Nevada experienced an 11 percent decline.

Only three states fared worse, according to the study.

The reduction in retirement benefits was even worse. In part due to the benefit reductions passed for all teachers hired after July 1, 2015, Nevada teachers saw their average future benefits cut by an amount worth approximately 14 percent of payroll.

That is the largest reduction nationwide and well above the national average cut of 1 percent of payroll.

McGee concludes by warning that this problem is only going to worsen in coming years — as costs are set to rise even if plans hit their highly optimistic assumptions!

In Nevada, McGee projects a 1.5 percent annual increase in PERS costs if all assumptions are hit. That increase jumps to 3.5 percent if the system only returns the 6 percent their investment advisor has forecast.

The full study can be downloaded from the Manhattan Institute’s website here.

For NPRI’s analyses of the Nevada PERS situation, visit: http://www.npri.org/issues/detail/pers

Robert Fellner is the director of transparency for the Nevada Policy Research Institute, a nonpartisan, free-market think tank.

Robert Fellner

Robert Fellner joined the Nevada Policy in December 2013. Robert has written extensively on the issue of transparency in government. He has also developed and directed Nevada Policy’s public-interest litigation strategy, which led to two landmark victories before the Nevada Supreme Court. The first resulted in a decision that expanded the public’s right to access government records, while the second led to expanded taxpayer standing for constitutional challenges in Nevada. An expert on government compensation and its impact on taxes, Robert has authored multiple studies on public pay and pensions. He has been published in Business Insider, Forbes.com, the Las Vegas Review-Journal, the Los Angeles Times, the Orange County Register, RealClearPolicy.com, the San Diego Union-Tribune, the Wall Street Journal, the Washington Examiner, ZeroHedge.com and elsewhere. Robert has lived in Las Vegas since 2005 when he moved to Nevada to become a professional poker player. Robert has had a remarkably successfully poker career including two top 10 World Series of Poker finishes and being ranked #1 in the world at 10/20 Pot-Limit Omaha cash games. Additionally, his economic analysis on the minimum wage won first place in a 2011 George Mason University essay contest. He also independently organized a successful grassroots media and fundraising effort for a 2012 presidential candidate, before joining the campaign in an official capacity.