SAGE Commission: Employee Costs Exorbitant

Nevada Taxpayers could save more than a half-billion over the next five years by adjusting retirement and benefit costs closer to those of the private sector, according to a bi-partisan efficiency panel appointed by Governor Jim Gibbons..

The Nevada Spending and Government Efficiency Commission said in a new report that the salaries paid to state workers are similar to equivalent positions in the private sector. Commission Chairman Bruce James said, however, that the insurance and retirement benefits offered to state employees “exceeded the Nevada private sector and most other states by a wide margin.”

Notes From The Ropes

Just over a week ago, I posted an entry on NevadaTaxpayer.com pointing out the deceptions penned by a professor of Higher Taxation up in Reno and published in the Las Vegas Sun. I rewrote the gist of my web post for a newspaper format and submitted it to the Las Vegas Review Journal about the middle of last week, and was pleasantly surprised to find it in the Sunday Opinion section. The reaction has been quite fascinating.

It’s not just the reaction in the comments appended to the RJ article, where government union folk explain that they’ve had to get smaller raises in order to fund expansions of the defined benefit plan (ah, smaller raises that have resulted in one of the highest government paychecks in America, don’t ya know!)  or the university professor who notes that the 10% of his paycheck (matched by 10% more from taxpayers) goes into a defined contribution plan instead of a defined benefit plan, therefore not all government employees are in a defined benefit plan (university professors are the acknowledged exception to the rule, and the only group most of whom gets a double COLA for more than the past ten years).

Casey Gillham, who graduated from UNR in 2004 or so, worked through a brief succession of three government jobs in Northern Nevada before enrolling at Oregon’s taxpayer-funded law school, emailed me that “Your defeat was a glorious day for the citizens of Nevada.  You are a case study on why being an asshole never pays!”

I’d like to see the syllabus for his school’s class on Logical Argument. Of course, it’s pretty tough to logically argue that Nevada’s government employee structure (very low number of them per thousand citizens, along with very high average pay, along with their constant refrain that they need more co-workers) is logical. Or that taxpayers are actually saving money by incurring triple the retirement costs that most private employers invest.

But that’s just exactly what Review Journal correspondent Irwin Kaufman did in his letter to the editor, published today.

LETTERS: Beers’ arguments still watered down

To the editor:

It’s obvious that former state Sen. Bob Beers has a lot of time on his hands. What else could account for his rambling Sunday commentary attacking the well-reasoned post of University of Nevada, Reno professor Elliot Parker? [A]

Mr. Beers, a Republican who lost his re-election bid last month, grudgingly admits Mr. Parker is correct when he states that “only 5.5 percent of Nevadans work for the state or local or governments, the lowest share in the 50 states by far.” This fact was the major premise of the professor’s argument that we need more government employees. [B]

Mr. Beers, however, has another agenda. The professor’s position gave him another opportunity to repeat attacks on the benefits of Nevada’s government employees.

For example, Mr. Beers mentions that Social Security taxes are paid by non-government workers but not by government and school employees. He omits the obvious reason for this disparity: Nevada governments opted out of Social Security, thus saving the state millions of dollars in matching contributions. [C]

Mr. Beers continues with his familiar argument that government employee unions have too much power, without any elucidation. [D]

Finally, he uses the per-pupil costs of Faith Lutheran Jr./Sr. High School to illustrate that education can be provided privately at competitive costs. Because Faith Lutheran is a religious school with a selective admissions policy, this comparison is meaningless. [E}

Mr. Beers could spend his sabbatical auditing classes in economics and education so he can better understand the topics he opines upon.

Irwin Kaufman
LAS VEGAS

Googling Mr. Kaufman reveals an interesting portrait - a profile on Linkedin.com soliciting government contracts (education management) but sadly not having a single reciprocal contact. Here are a few thoughts on Mr. Kaufman's points...

[A] One wonders if Mr. Kaufman actually ready Professor Parker’s article?

[B] One wonders if Mr. Kaufman actually read my article as well. Professor Parker’s argument seems to be that we have a low number of government employees per thousand citizens, therefore we Nevadans are chintzy in funding government, therefore we need more government funding. I pointed out that the Professor is being deceptive by only including his source’s statistic of a low number of employees per thousand citizens, and not telling readers that his source also says Nevada pays near the top of the scale for government workers. My implication is that if we paid government wages closer to national averages, we would have funding available to hire more public servants.

[C] Mr. Kaufman is embarrassingly mistaken. Yes, Nevada taxpayers, in opting out of social security, avoid a social security contribution of 6.2% of wages. In doing so, taxpayers incur a PERS contribution cost of 10% of wages (for state, university, and rural county local government employees) or 20% of wages (for most other government employees) or 30% of wages (for Clark and Washoe County police and fire employees). Mr. Kaufman states that this practice results in taxpayers paying less money to fund benefits. Let’s see… 6% is larger than 10%, 20% and 30%… Mr. Kaufman isn’t making sense.

[D] More proof that Mr. Kaufman has not actually read my article. The entire thing lays the case out pretty clearly.

[E] Huh? Mr. Kaufman appears to be stating that because the private schools do not have to admit disruptive students, you can’t compare per-pupil funding between any private and public school – yet that’s exactly what Professor Parker does in his essay. Mr. Kaufman’s objection would seem to render Professor Parker’s comparison invalid on its face, where I merely showed that his comparison is factually wrong.

A simple equalization measure would be to axe the mandate that government schools force young adults who insist on not learning (and disrupting others) to disrupt the learning of those who are interested.

State Archivist Departs Urging Tax Shift From Tourists To Residents

Nevada’s State Archivist Guy Rocha made the front page of the newspaper with news of his retirement. He offered, in addition to his usual ability to fascinate with his command of Nevada history, some political views. For example:

“I find it disturbing this state that has essentially been my life is, in my opinion, on the brink of disaster. You can’t cut 34 percent or more without devastating state government”… Rocha fears legislators in the coming session will cut state spending so severely that it might take decades for his and other agencies to recover.

This is a little melodramatic. The latest estimates of Nevada’s tax revenue for the next two years is that state tax revenues will be about this same for the two years starting July 1, 2007 as it was for the two years starting July 1, 2005, and that it will be about the same for the two years starting July 1, 2009. Our flat revenue is much higher than revenue was for the two years starting July 1, 2003, and that number was swollen with the largest tax hikes in many decades passed by the 2003 Legislature. Later, Rocha notes he was a history major.

Rocha parts with this:

Rocha also criticized the state’s tax structure, saying it relies too much on tourist-generated revenues and leads to wild swings in the state’s financial health.

“We need a 21st-century Nevada, and it can’t rely on tourism to keep driving the engine,” Rocha said. “Tourism will no longer be able to sustain state government unless people are satisfied with a government so small it can’t do very much at all.”

All the available evidence indicates that our ability to export taxes to visitors has led to greater tax structure stability for Nevada, rather than wild swings. The current economic downturn (the private sector is down and losing jobs while the public sector is flat and not losing jobs) started with the “locals” economy of residential construction, and for many months tourism continued to do well, and the 2001 downturn was much less severe in Nevada than most states due to how quickly tourism rebounded.

Nevada Government Economist Tells Half Truths

This morning’s Las Vegas Sun featured a guest column from state government economist Elliot Parker. In his column, Parker lays out his case for more tax hikes, which will be required to hire more government employees and give them higher wages. You can read his column here.

Parker’s column essentially says Nevada’s people have been terribly chinzy when it comes to funding government, particularly as compared to other states. It would be a mistake, he implies, to not raise taxes and further expand government.

As an economist, government or not, Parker should be embarrassed by his intellectual dishonesty.

He writes:

According to the most recent version of the Statistical Abstract of the United States, only 5.5 percent of Nevadans work for the state or local governments, the lowest share in the 50 states by far.

This is probably a true statement, although the Statistical Abstract of the United States is very large, and Parker should offer a more detailed attribution. However, it presents only one half of what’s wrong with Nevada’s structure of government.

The very same authority (the Statistical Abstract of the United States) also says our government employees are paid the six highest of all states. Here is the Statistical Abstract of the United States. Table 448 – here is a direct link – column M details average earnings in 2006, the most recent year reported. [Subsequent correction: column M details local government only. Column J details state government, where Nevada ranks sixteenth, still above the national average.]

These wage numbers – in which Nevada ranks the sixth highest state – do not reflect Nevada’s exceptionally generous benefits package.

All of Nevada’s government employees participate in perhaps the only “defined benefit” retirement plan found in the entire state, public or private sector. And for local government and school employees in Clark and Washoe County  – well over half of all state and local government employees in Nevada – taxpayers foot the entire bill.

To put it in terms that most taxpayers can understand, where we lose 6.2% of our paycheck to fund social security, our government employees do not. So, for a given wage, they take home a bigger paycheck. (The rest of Nevada government employees, by the way, fund half of their own retirement plans out of their paychecks but it’s over 10% rather than 6.2% – on the other hand, they get alot more retirement income and retire much younger than the rest of us.)

If you factor in how government retirement works in Nevada compared to the five states that outrank us in average government pay, we’d likely rank higher than sixth.

Nevada’s “structural deficit” lies in giving government unions too much power, which has resulted in our having the fewest government employees per thousand residents (dutifully reported by Parker) who are paid at or near the top of America’s government pay scale (incredibly omitted by Parker).

Parker next rambles down the taxes-per-capita path without attributing his statistics. For example:

Adding in spending by local governments, Nevada ranks 48th in government spending as a share of income.

Since the Statistical Abstract of the United States does not explicitly calculate this, he owes us a peek at the bar napkin he scratched his out on.

Here’s mine:

Statistical Abstract of the United States, Table 424, column B has total revenue by state for 2005. Table 12, column AK, has 2005 population estimates, which appear to be overstated for Nevada. Nevertheless, you can put the two of those tables together to calculate tax revenue per person. Nevada ranks 29th, at $7,868 per person.

Since this clearly does not support the “chintzy Nevadans” refrain, and since Nevada’s historically modest government has not surprisingly produced a society with a robust economy, low poverty and high incomes, Parker had to track down average income levels. They’re here, in table 684, column M (unfortunately, this lists family median income by state for 2006, which is not quite average income for 2005, but it’s close).

And Nevada ranks 42nd, ahead of 8 states. Not 48th.

Parker finishes up with the now almost-legendary deception that:

The Tax Foundation reports that Nevada has the next-to-lowest tax burden in the nation, just slightly above Alaska. That ranking is roughly where we have been since the 1970s.

The Tax Foundation actually found that while we rank low on the taxes we assess on ourselves, we rank high on the taxes we assess from non-residents (tourists), and at the national median for total spending per capita. Once again, Parker selects a deceptively small subset of the available information to lead readers to an incorrect conclusion.

In case his subtle sins of omission are not enough, Parker finishes with a couple of whopping lies:

…there are also many things the private sector cannot efficiently provide. Like national defense, affordable and available public education is one of these.

and

Unlike most other states, Nevada has no private universities, so this is an important responsibility.

These are really the heart of the matter for Parker. As a government economist in Nevada, he’s been enjoying doubled cost-of-living raises for years (once for inflation and again from the NSHE “merit” program under which almost all professors get an extra COLA bump). And if we don’t raise taxes, he may not get either next year.

Of course the private sector can efficiently provide education. In Las Vegas, for example, Faith Lutheran‘s middle school tuition was $7,260 in 2006 including capital costs and debt service; that same year, Nevada public school funding was $7,345 not including capital costs and debt service.

And there are a growing number of private colleges in Nevada, including: Touro College, Sierra Nevada College, DeVry University, National University, ITT Technical Institute, University of Phoenix, Morrison University, University of Southern Nevada, with my apologies to the many more I don’t have time to list.

Their Gain Is Our Loss

Nevada government unions are getting militant against their employer.

The “wicked profiteer” they work for finds revenue falling.

Why, their cruel taskmaster exploiter is even talking about avoiding layoffs by not giving them raises.

We’ll sue,” their elected and well-paid leaders threaten.

Are there any dues-paying government union members who are not embarrassed by their union’s behavior? This isn’t turn-of-the-century labor action against selfish capitalists! This is modern, selfish labor action against struggling, taxpaying Nevada families, who are already not doing as well as government employees.