In the red?

A Chicago-based public interest auditing firm has warned that Nevada doesn’t have enough money to pay its bills.

The Truth in Accounting Institute finds Nevada is “in a precarious financial position” because it does not have the funds available to pay more than $4.3 billion in commitments if the bill came due today.

State Controller Kim Wallin replies the state certainly does have enough money to pay its bills — the critics are acting as though all those bills will come due immediately, because they do not understanding the accounting system used by Nevada’s government.

“Our pension liability is like a mortgage,” Ms. Wallin said. “You pay it off over 30 years, or a long period. This organization is saying if the state shut down completely now, we won’t have the money to pay all our outstanding bills. That’s true, but we aren’t shutting down.”

But Sheila Weinberg, founder and CEO of the nonprofit and nonpartisan Truth in Accounting, called such cash-based accounting “an unreliable and an antiquated system” that the IRS prohibits for large private businesses.

“It isn’t like a mortgage,” Ms. Weinberg replies. “With a mortgage you end up with a house. What they are doing is more like a credit card.”

Ms. Wallin is correct when she says Nevada state checks aren’t likely to start bouncing anytime soon. She’s also correct that the state’s system of accounting is nothing new.

But the Chicago auditors aren’t completely wrong, either. The notion that the state can make promises based on expected future tax revenues is bold enough. To then additionally assume that Public Employees’ Retirement System investments will continue to produce average returns based on past performance adds another layer of audacity.

Conducting its own study last month, PERS contended a changeover from the existing defined-benefit plan to what is called a defined-contribution plan — more like the familiar private-sector 401(k) — would not lead to lower costs for 20 years and would cost $1.2 billion to implement.

Really? Placing government employees in a position to manage their own retirement funds, and assume their own risks, would cost more than promising them a fixed benefit, no matter how long they live, and no matter how markets may perform in future, with taxpayers on the hook to make up any shortfall?

Pardon us: That doesn’t pass the smell test.