Posts Tagged ‘Pew Center’

Nevada Budget Likely To See Fewer Impacts From “Fiscal Cliff”

By Sean Whaley | 11:57 am November 20th, 2012

CARSON CITY – The impacts of the so-called “fiscal cliff” on Nevada’s state budget would likely be less significant than for many other states because of our lower dependence on federal spending, according to an analysis by the Pew Center on the States.

The impact on state tax revenues do not apply because Nevada does not have a personal or corporate income tax, according to the report The Impact of the Fiscal Cliff on the States. The report examines the potential effects on each of the states.

Analysis includes Nevada-specific numbers

On the federal spending cut side of the equation, Nevada’s share of federal grants subject to sequester, looked at as a percentage of state revenue, is slightly higher at 6.7 percent than the national average of 6.6 percent, and so could mean financial impacts.

But Nevada ranks well below the national average for federal spending on procurement, salaries and wages as a percentage of the state’s gross domestic product at 3 percent compared to the national average of 5.3 percent.

Nevada is also below the federal average for federal defense spending on procurement, salaries and wages as a percentage of the state GDP at 1.8 percent compared to the national average of 3.5 percent.

Federal non-defense spending on procurement, salaries and wages as a percentage of state GDP is 1.2 percent in Nevada compared to 1.8 percent nationally.

These numbers cited in the Pew report are all based on 2010 information.

And federal non-defense workforce as a percentage of total employment in the state is 0.9 percent in Nevada compared to 1 percent nationally, based on 2012 data.

But the Pew analysis notes: “The general economic slowdown that could result if the full fiscal cliff were allowed to take effect would likely overwhelm any of the separate impacts.”

Nevada officials are looking at the issue as one of several budget variables

The report, released Nov. 15, comes as Nevada Gov. Brian Sandoval is finalizing his 2013-15 state spending plan, which will take effect on July 1, 2013.

The impact of the federal fiscal cliff is just one more variable that could affect Nevada’s general fund budget. Another is expanding Medicaid to a new group of eligible state residents. Sandoval has not yet announced his decision on whether to support the expansion, which would be paid for nearly entirely with federal funds in the first few years.

“The Budget Division is currently evaluating the impacts of sequestration on federal funding to the state of Nevada,” said Director Jeff Mohlenkamp in a statement. “Specifically, we are researching reductions that would have direct impact on services to citizens. Some federal reductions may eliminate the resources to provide services but not eliminate requirements to maintain service levels. The potential for this type of unfunded mandate is of particular interest to the Budget Division as we prepare the budget for FY 2013 – 2015.

“There is a great deal of uncertainty surrounding other elements of the ‘fiscal cliff,’ ” he added. “ We understand the possible implications on the larger economy. At this point, we cannot speculate further as most of the critical decisions have not been made.”

The Pew study shows some states more dependent on federal spending

The Pew report on the fiscal cliff says that federal grants to the states constitute about one-third of total state revenues, and federal spending affects states’ economic activity and thus their amount of tax revenues.

Roughly 18 percent of federal grant dollars flowing to the states would be subject to the fiscal year 2013 across-the-board cuts under the sequester, according to the Federal Funds Information for States, including funding for education programs, nutrition for low-income women and children, public housing, and other programs.

Because states differ in the type and amount of federal grants they receive, their exposure to the grant cuts would vary. In all, the federal grants subject to sequester make up more than 10 percent of South Dakota’s revenue, compared with less than 5 percent of Delaware’s revenue.

Federal spending on defense accounts for more than 3.5 percent of the total gross domestic product (GDP) of the states, but there is wide variation across the states. Federal defense spending makes up almost 15 percent of Hawaii’s GDP, compared with just 1 percent of state GDP in Oregon.

The fiscal cliff, a series of expiring federal tax provisions and scheduled spending cuts, are set to take effect in January unless Congress reaches agreement on a deficit-reduction plan.

Scheduled tax changes account for roughly four-fifths – or $393 billion – of the total amount of the fiscal cliff. The scheduled spending cuts account for $98 billion – or about one-fifth – of the federal budget impact of the fiscal cliff. Over half of this amount is due to sequestration required under the Budget Control Act of 2011.

“To understand the full cost and benefits of proposals to address the fiscal cliff, policy makers need to know how federal and state policies are linked,” said Pew Project Director Anne Stauffer. “The implications for states should be part of the discussion so that problems are not simply shifted from one level of government to another.”

If the full force of the fiscal cliff is realized, the federal deficit would be reduced by $491 billion, the Pew Center analysis says. However, the Congressional Budget Office has projected that the entirety of the fiscal cliff would be a major driver of a general economic slowdown in 2013. Such an outcome would likely negate the more specific, separate impacts described in the analysis.

“Given the uncertainty about whether any or all of the policies in the fiscal cliff will be addressed temporarily or permanently, it is important to understand that the effects of the different components will vary across states,” Stauffer said.


State Public Employee Pension Plan Sees 2.9 Percent Return In Fiscal Year 2012

By Sean Whaley | 5:07 pm July 11th, 2012

CARSON CITY – Nevada’s Public Employees’ Retirement System earned an estimated 2.9 percent return on its investments in the fiscal year ending June 30, and is now valued at $25.8 billion, an official with the plan said today.

The 2012 return is below the 8 percent anticipated annual return for the system’s investments over the long term.

While well below the record 21 percent return in Fiscal Year 2011, and the 10.8 percent return in Fiscal Year 2010, the 2012 gain will be in the top 20 percent of performers for large public pension plans for the year when adjusted for risk, said Dana Bilyeu, executive officer of PERS.

“So as far as looking at all of the big institutional investors across the country, we’re quite competitive with that kind of return,” she said. “In fact I think it’s going to be one of the top performing funds in the nation. You can only get what these markets are going to give you.”

Dana Bilyeu, executive officer of the Public Employees' Retirement System

The three years of positive returns follow a 15.8 percent loss in 2009.

A final report on the year’s performance will be presented to the board overseeing the plan in August.

The estimated returns are after fees are paid to the investment managers overseeing the retirement funds on behalf of the nearly 100,000 state and local government employees and 41,000 retirees participating in the public pension plan as of June 30, 2011.

“When you talk to the investment professionals, I think most of them would say that what we’ve sort of taken here is a pause in what has been a very large increase in the overall equity markets over the last couple of years,” Bilyeu said. “So maintaining a positive return, maintaining the corpus of the trust, and really just pausing I think is what you see happening here. And that’s what I sort of think this particular fiscal year was.”

The uncertainty over the presidential election is partly responsible for the lackluster equity market, she said.

Over 28 years, the average return for the plan is 9.2 percent after fees have been paid, above the 8 percent assumed return. Some critics of the state’s defined-benefit public pension plan say the expectation of an 8 percent long-term return is overly optimistic given the volatile markets of the past decade.

The plan was only 70.2 percent fully funded at the end of fiscal year 2011, a level below the minimum 80 percent some experts say is the best measure for a healthy plan. The long-term unfunded liability equated to $11 billion as of June 30, 2011. The funding ratio through 2012 will be reported to the board in November.

Some estimates put the unfunded liability at much higher levels based on a different type of analysis.

The Pew Center on the States said in June the financial health of Nevada’s public employee pension plan is cause for serious concern because it is below the 80 percent benchmark that fiscal experts recommend for a sustainable program.

Bilyeu argues that a better measure of the health of a pension plan is whether it is being funded each year at the levels recommended by an independent actuary, which is the case for the PERS plan. Not all public pension plans across the country are funded annually to the recommended levels, she said.

Nevada Gov. Brian Sandoval is advocating for a change to the pension plan for future workers from a defined benefit to a 401(k)-style defined contribution plan. Defined contribution plans eliminate any future unfunded fiscal liability for states. The 2011 Legislature took no action on the issue but it is expected to resurface in 2013.

The PERS fund is currently invested 35 percent in bonds and 65 percent in equities and other “risk exposed” investments.

“Over the long haul we remain very, very committed to the investment strategies we have,” Bilyeu said. “We’re in it for the long haul.”


Audio clips:

Dana Bilyeu of PERS says equities took a pause in Fiscal year 2012:

071112Bilyeu1 :33 fiscal year was.”

Bilyeu says the 2.9 percent return will be among the best performing large institutional funds for 2012 after being adjusted for risk:

071112Bilyeu2 :10 in the nation.”


Nevada’s Public Employee Pension Plan Gets Low Marks In Latest Pew Study

By Sean Whaley | 3:05 pm June 19th, 2012

CARSON CITY – The financial health of Nevada’s public employee pension plan is cause for serious concern because it is only 70 percent funded as of fiscal year 2010 with a $10 billion gap, a national organization reported this week.

The Pew Center on the States said the funding ratio in Nevada is below the 80 percent benchmark that fiscal experts recommend for a sustainable program.

In 2010, Nevada paid 92 percent of the recommended contribution to its pension plans and just 21 percent of what the state should have paid to fund retiree health benefits, the study found.

Nevada’s “serious concerns” grade for its pension plan is the lowest of three in the new Pew report released Monday, which examines the solvency of public pension plans across the nation. The state received a better “needs improvement” grade on the retiree health care issue. The top ranking is “solid performer.”

Nevada state pension official questions the Pew analysis

Dana Bilyeu, executive officer of Nevada’s Public Employees’ Retirement System, said that while she respects the Pew center’s efforts to calculate the national pension liability, the heavy reliance on the funding ratio for the state scores presents an incomplete picture.

“Nevada has always made its payments,” she said. “Both the employers and the public employees themselves. And to me that is the single best measure for determining if a pension plan is in trouble.”

Nevada’s contribution rates are based on an analysis by an independent actuary, and are fully paid each year despite the Pew report findings, Bilyeu said. Some other states take “pension holidays” where they defer contributions to their pensions, yet they have better grades in the study because of higher funding ratios, she said.

“I just disagree that the single driver of the score is the funding ratio,” Bilyeu said. “I have made this comment to Pew in the past but it has not made it into their methodology.”

The new report notes that the Nevada Legislature in 2009 made some reforms to the plan, which covers nearly all state and local government public sector workers, including raising the retirement age for newly hired workers to 62.

Nevada Gov. Brian Sandoval has advocated for a change to the pension plan for future workers from a defined benefit to a 401(k)-style defined contribution plan. Defined contribution plans eliminate any unfunded fiscal liability for states. The 2011 Legislature took no action on the issue but it is expected to resurface in 2013.

Pew study shows pension finances worsening nationally

Nationally public pension plans lost more ground in the new study, called “The Widening Gap Update.”

“States continue to lose ground in their efforts to cover the long-term costs of their employees’ pensions and retiree health care due to continued investment losses from the financial crisis of 2008 and states’ inability to set aside enough each year to adequately fund their retirement promises,” the report said.

“States have responded with an unprecedented number of reforms that, with strong investment gains, may improve the funding situation they face going forward, but continued fiscal discipline and additional reforms will be needed to put states back on a firm footing,” the report said.

In fiscal year 2010, the gap between states’ assets and their obligations for public sector retirement benefits was $1.38 trillion, up nearly 9 percent from fiscal year 2009. Of that figure, $757 billion was for pension promises, and $627 billion was for retiree health care.

The Pew report said that more than half the states’ pension plans were fully funded in 2000. By 2010 only Wisconsin was fully funded, and 34 were below the 80 percent threshold – up from 31 in 2009 and just 22 in 2008.

Other organizations question if Pew is understating the financial implicatioins

Another group is questioning, however, whether the Pew study is actually understating the financial risk facing taxpayers because of the underfunded public pension plans.

Bob Williams, president of State Budget Solutions (SBS), a nonprofit organization advocating for fundamental reform of state budgets, said the Pew Center report understates the real funding gap for public pension plans.

The actual number for unfunded state and municipal pensions is greater than $4 trillion, he said in a statement issued today.

“The most dangerous deception in the Pew report is the failure to not recognize that public pension funds are putting more taxpayer and worker money into riskier investments,” Williams said. “Ignoring this will set taxpayers up for a bigger catastrophe in the future.”

“State Budget Solutions urges elected officials to understand the full scope of our nation’s pension crisis,” he said. “It is vital that pension reform be based on actual numbers instead of Pew’s optimistic outlook.”

Other analyses of the country’s public pension plans, including those by the American Enterprise Institute, put the unfunded liability at much higher levels than the Pew report.

Williams said in a telephone interview that the last time Nevada’s pension liability was calculated by the organization, it was closer to $33.5 billion, not the $10 billion reported by Pew.

The public pension crisis will be worse than Enron, he said.

“Most of the reforms in the states have addressed new hires,” he said. “They should end the defined benefit program for everyone and switch to defined contribution. It’s the only way out of the system. When you’re in a hole you have to stop digging, and most states aren’t willing to do that.”


Audio clips:

Bob Williams, president of State Budget Solutions, says Nevada’s pension liability is much bigger than the Pew report suggests:

061912Williams1 :27 worse than Enron.”

Williams says states should switch to defined contribution retirement plans for all public employees:

061912Williams2 :14 to do that.”




Immigration Bills Fall Short As Deadline Passes

By Andrew Doughman | 10:42 am April 18th, 2011

CARSON CITY – Bills related to immigration at the Nevada State Legislature did not make it past an important deadline last week.

One bill from Assemblyman Pat Hickey, R-Reno, would have required Nevada to use an electronic database to verify a person’s employment eligibility.

Another from Assemblyman Ira Hansen, R-Sparks, would have mirrored an Arizona law whose proponents crafted to curb illegal immigration, but whose detractors say encourages racial profiling. That law is currently tied up in the court system.

The dearth of immigration bills makes Nevada somewhat of an oddity in the United States. Other states are considering or have passed immigration legislation. Most lawmakers have sought to apply more stringent standards to current laws.

Utah, however, has passed a law that would allow police to check immigrants’ status, but would also allow illegal immigrants to obtain a permit to work in Utah.

In Nevada, even the sponsors of immigration bills seemed resigned to the death of their bills as a bill deadline loomed last Friday.

Hansen and Hickey did not press a Democratic committee chair to ensure the bills passed.

The bills did not have the votes to pass out of committee, they said.

Hansen said that tepid comments from legislators in addition to ambivalence from the business community and unions ensured his bill would not be considered.

The immigration issue, however, has not been primary to any discussion at the Nevada Legislature. The state’s fiscal woes have ensured most discussions relate to the governor’s proposed general fund budget. Bills changing the state’s education policy have also gained traction.

But immigration is not popular. Assembly Republicans have listed several legislative priorities, which would have more effect on public sector and trade unions and trial lawyers than on immigrants.

According to the Pew Center, however, Nevada hosts a high percentage of illegal immigrants compared to its population.

Nevada’s foreign-born population has also grown during the past decade to nearly 20 percent of the population, according to the American Community Survey. This population comprises both citizens and non-citizens.