September 4, 2008

Close to $100 million in overtime

Public Employee Salaries and Benefits are Draining Government Coffers

A few weeks ago, the Nevada Policy Research Institute released a story on the high and growing salaries and benefits given to public employees in Nevada's largest cities and counties. Further research has found a similar story in the smaller counties in Nevada as well.

While it was previously reported that hundreds of public employees in Nevada's largest cities receive annual compensation packages in excess of $100,000 per year and that dozens receive compensation above $200,000 per year, it was recently discovered that in Nevada's smaller counties, many public employees receive compensation packages well above the average pay for private sector workers in similar positions. Douglas County had 163 employees with compensation (denoting the cost of salary, overtime, and benefits) above $100,000 and one above $200,000, Lyon County had 39 employees costing taxpayers more than $100,000 per year, 31 of Churchill County's 236 employees received compensation above $100,000, and Lander County had 7 employees who cost taxpayers more than $100,000.

Speaking of overtime, Nevada’s state, county, and city governments spend millions each year in that category, with some local governments allocating more than 10 percent of their salary budget to overtime pay. NPRI already reported that Clark County spent $32.5 million on employee overtime, the State of Nevada spent more than $29.1 million, the City of Las Vegas more than $21.3 million (employee salaries now make up close to three quarters of the city’s overall spending), Washoe County spent more than $2 million, and Carson City spent over $1.6 million. Further open records requests to Nevada's smaller counties found that Douglas County spent $1.4 million on employee overtime, Lyon County spent $1.08 million, Humboldt County paid out $361,860, Churchill County spent $296,736, Eureka County spent $203,391, Lander County spent $125,992, and even Esmeralda County with a population of just a few hundred people spent $16,000.

It should be recognized that numbers are only available from the counties that provided data through open records requests. Some counties in Nevada agreed to provide such information for fees ranging from a few hundred to $3,000--clearly more money than it would cost a county employee to gather and disseminate such information. Even worse, some counties declined to provide such information at all. For example, officials at Storey County repeatedly stated that they never received our open records requests, then stated that our open records requests had already been fulfilled, and upon being asked to re-send them, these officials once again stated that they never received the open records requests in the first place and insisted that I contact that county controller. Hugh Gallagher, the controller for Storey County, refused to provide any information to your humble author, and would not even say why he won't provide such information. Other counties asserted that their accounting systems are not detailed enough to determine the amount of money paid in benefits or overtime per employee, and one city even asserted that it does not know how much it pays its public employees each year.

It should also be recognized that many of the open records requests were often only fulfilled for public employees, but some of the government entities examined also pay a significant amount of money to consultants. Because these consultants are not regular employees, it is possible that the money paid to them comes out of budgets that are not very visible to taxpayers. For example, in the news recently was Lacy Thomas, former CEO of University Medical Center, who allocated hundreds of thousands of taxpayer dollars for no-work contracts given to his friends. Problematically, consulting contracts are common in government, with some consultants being paid several hundred dollars per hour.

Not only are public employee salaries draining governments in Nevada, but the benefits packages given to public employees are expensive as well. A recent study found that the state spent $14.3 million on health care benefits for state retirees just four years ago, but $36.6 million will be spent for these benefits this year. Further, it will cost the state $3.3 billion to cover this benefit over the next 30 years. This is in part because Nevada’s state retirement system allows many employees to retire early and draw full benefits as well as a significant portion of their salaries for the duration of their lives. Problematically, Nevada’s Public Employees’ Retirement System (NVPERS) now has an unfunded liability of 16.8 percent ($4.8 billion) and growing, while the police officer and firefighter retirement system has an unfunded liability of 26 percent ($1.7 billion) and growing. In comparison, the private sector has been cutting health care programs and allowing employees to buy their own medical insurance or utilize the Medicare system. While state retirees who do not qualify for Medicare should not be cut off, reform is necessary before entitlements bankrupt the state.

General reforms could include mandating more transparency in public employee salary and benefit data, limiting the pay for consultants, and implementing more efficient processes so that less overtime is necessary. In terms of benefits, reforms could include capping the benefits paid out, requiring that retirees pay a small monthly fee to continue their benefits, increasing the number of years for full retirement eligibility or indexing retirement to a higher age, discontinuing the practice of letting employees buy additional years of retirement, ending the practice of allowing volunteers to retire with benefits, mandating that a portion of overtime pay be included in retirement contributions, mandating a larger employee contribution to the NPERS system, increasing vesting policies such that a half-time employee is not vested for retirement after just 2.5 years of actual work over a five year period, removing some of the more stringent work requirements prohibiting PERS members from continuing to work after retirement, and hiring more contractors (at reasonable salary levels) who do not qualify for pensions in contrast to civil servants.

In conclusion, it should be stressed that many public employees do an excellent job and all deserve competitive salary and benefits packages, but the compensation given to some is excessive. Reform is necessary before public employee salaries and benefits bankrupt the state.