Bill Crawford called out PERS in a recent column carried by several newspapers He also calls out the politicians for lacking the "political will" to do anything about PERS. Keep in mind when reading this post that the average rate of return for PERS is 13% for the last four years. In other words, the market came back, PERS didn't. Read on:
Ask your favorite state or local officials if they have seen this statement: “A contribution rate of 16.29 percent of active members’ compensation for the 2014/2015 fiscal year would be needed in order to keep the anticipated accrued liability payment within 30 years in accordance with GASB Statements 25 and 27.”
It’s at the bottom of Page One of the annual financial valuation of PERS, the state retirement system.
Last year PERS adopted a funding policy “aimed at stabilizing the employer contribution rate” and said that rate would be fixed at 15.75 percent for 30 years.
Looks like 15.75 percent isn’t high enough…and sticking with that rate will make PERS noncompliant with accounting rules.
PERS also said last year, “The funding policy also establishes a goal for the System to be more than 80.0 percent funded by 2042.”
Hmmmm..... Remember when the Rankin County Board of Supervisors raised taxes to cover the increased contributions? Expect more of the same:
However, the annual financial valuation showed PERS’ funding level dropped to 57.7 percent In 2007 the funding level was 73.7 percent It has dropped every year since.
Said another way, in 2007 PERS’ unfunded liabilities totaled $7.07 billion. Today they total $15.05 billion.
And this was supposed to be a good year for PERS. After all, investment earnings averaged over 13 percent for the year. So, why the negative results?
Why indeed? $2.6 billion in investment income. Should be enough to cover the payments and grow the assets, right? Nope. The condition of PERS still worsened. Crawford continues:
First, the number of active employees decreased (567) while the number of retirees increased (3,385). Fewer employees paying in to support more retirees drawing out undermines the system. In 2004, there were 2.5 workers for each retiree. That has trended down to 1.8 today.
Second, average payroll decreased .2 percent. PERS’ funding formula depends on average payroll increasing at least 4.25 percent each year. (The higher the payroll the more the contribution rate generates.)
Third, despite contribution rate hikes, PERS continues to pay out more each year in benefits and administrative expenses than it receives in contributions. The shortfall this year was $707,632. This trend puts stress on asset growth. Indeed, since 2007, actuarial assets have increased just $0.7 billion or 3.5 percent while liabilities have increased $8.65 billion or 32.2 percent.
Everything PERS needs is going down, everything PERS doesn't need is going up. Crawford then spells out some rather unpleasant truths- and they are truths:
While retirees and, therefore, legislators continue to ignore PERS’ declining financial viability, credit rating agencies do not. Fitch Ratings just downgraded Mississippi’s bond rating outlook from stable to negative in part because of PERS’ growing unfunded liabilities.They won't do anything. Any legislator who proposes even studying PERS is immediately blasted by the Democrats and their friends in the media. Did I mention Mr. Crawford is a former member of the PERS Board of Trustees? He might actually know what he is talking about.
After you ask your favorite official about PERS’ latest financial dilemma, ask them what they propose to do about it.
Increasing revenue through higher contribution rates and better investment earnings were not enough to right the ship. Perhaps something should be done to reduce the ever-growing expenditure side too.
Looks like Crawford confirmed what I wrote a few weeks ago about PERS.
25 comments:
KF, thanks for your leadership here, seriously. If you weren't blowing the whistle on this, nobody would know. Crawford is flaky, he may change his mind again in two months and talk about how stable PERS is. He really could. You, on the other hand, have tried to keep this out there. Where is the leadership of our state on this? Crickets, it's one of the reasons why I say we don't have real leaders, just good R talking point guys (and girls, although Fitch is clueless and everyone knows it) Even our savior Chris McDaniel will enjoy his SLURP retirement one day. Stay on them KF, they'll eventually have to address this issue.
I draw a PERS check each month and I am most concerned about what is going on. If they decided to hold our 3% raise we get each year would not bother me, a lot of people depend on that money to make ends meet, especially if they get the 13th check in December. I know PERS needs fixing but the ones who can actually fix it, could care less if it is fixed or not.
He's been keeping up with PERS and is pretty consistent. He's reading the actuarial reports. Fitch sent the state a nice warning but you will not see the problem addressed by Republicans or Democrats.
Let's face it, we simply don't have the right Republicans there that will call attention to it. We should stop the bleeding and convert immediately on every new employee and have two systems. Keep up the good work, someone has too.
...is immediately blasted by the Democrats and their friends in the media.
Because in the minds of those numbskulls the only solution is higher taxes to fund the shortfall. Screw the broken model. Just raise taxes.
Consistently, Kingfish, having absolutely no knowledge of or about the system, is ever the cheerleader for its demise. This is right up there with posting videos of a woman being arrested for DUI and running a contest for boob queens in the Metro. Go Fish!
There ain't enough contests for boob queens around these parts and if you can't enjoy a contest for boob queens then you need to high tail your queer ass the hell out of here!
We have a PERS problem not unlike the Social Security fix we will soon confront. On the non-financial horizon we have delayed infrastructure needs. Jackson and other large municipalities put off infrastructure needs until the courts force the issue (or the actually materials start to crumble).
The PERS system is a lawmakers payday someday. We need new lawmakers who either don't need the retirement themselves or are able to discuss the issue frankly. I'm a retiree myself. If I put my hat in the ring for a legislature seat-- I would firstly have to persuade my wife to vote for a radical. And also perhaps answer the phone on occasion.
I believe the 13th Check needs to be revisited for sure. However, we have very few politicians who have the intestinal fortitude to do so. With that being said, we need to look at some tweaks that (though they won't be the silver bullet PERS needs) will stop the leak. Here's a proposal that can help (but not necessarily fix) PERS:
1) As of July 1, 2014, all new hires will be eligible for voluntary 5% match 401(k) (and they will not be enrolled in PERS). The State Agencies will continue to be required to contribute 14.65% per employee, however only (up to) 5% of it will go towards the voluntary new hire match while the 9.65% will go to PERS to help shore up system for the current employees and retirees. While I concede that the system needs some major changes, I think some immediate changes like the proposed can help stop the leak (of new employee obligations) while the politicians deal with their angst.
Dear 6:15: Kingfish has filed more FOIA requests for PERS documents, dug through them extensively and talked to more people who have been involved with the system than anyone else. Try again.
Like the Lt. Governor's vehicle fleet 'draw down',the declining head count is central to understanding PERS. IT innovation, patronage, educational inertia, growing imprisoned population , and poor economic climate have even more to do with it. The PERS sweetening and state patronage under Musgrove was the downfall in state government generally.
Ironic how DoubleChinCheeseburger Reeves is pushing his bona fides about cutting $9 million for state vehicles while he sat back for eight long years as our CFO and said NOTHING about PERS and MPACT despite all the metrics clearly signaling that impending trouble was looming large on the horizon.
The 13th check is not the problem. Like a democrat thinking raising taxes on millionnaires will solve the national economy crisis, some of you think aboloshing the 13th check will float the PERS boat. It will not. And for the few numbskulls out there who actually believe taxes are, could or every have been raised to cover the shortfall, that's sheer ignorance.
"...the declining head count is central to understanding PERS. IT innovation, patronage, educational inertia, growing imprisoned population , and poor economic climate have even more to do with it."
Please explain.
IT practices affect PERS how?
Political patronage has always existed, even when Mississippi's PERS was the nation's strongest. Patronage, like barnacles on a ship are there whether the ship floats or sinks and affect neither.
The poor economy hasn't really affected state agencies that much. Sure, there have been token cuts here and there on paper, but not enough to affect the formula or the outcome.
What educational inertia?
How has the prison population affected PERS?
A lot of pension funds, public and private, are required
to hold a certain percentage of their assets in low risk
investments such as Treasuries. Guess what Treasuries
pay ? Zip, nada. The effort to save the banking system
is killing pensions. Don't think individual savers will
Be treated any better in the future.
When thinking about PERS and it's downfalls, I do remember a certain legislator that wanted to tackle the issue. Unfortunately, he was railroaded by a local educator turned politician. In certain areas of our county, we don't have LESS people working. In fact, we have had an increase in staff, BUT we have had a huge increase in the amount of retirees that have retired, draw from the system, pay nothing in AND continue to work for the county!!! This takes jobs away from those that do contribute to PERS. This means people working in top positions but only allowed to work minimal days. No one clearly knows who is doing what, when or where because the Kingpin has taught them it is financially advantageous to retire, collect your full retirement benefits and then come back to work, making 25% of their pre-retirement salary, no more paying into PERS, limited days to work AND you make more money on this plan! I have to wonder how many other public employees have learned this trick of the trade and are contributing to the downfalls of the PERS system. But just ask the Kingpin, it is all legal and well within their rights! Next time he condemns charter schools because they will raise taxes or tells you he is NOT in favor of raising our taxes, remember he is the one that has trained many public employees on how to maximize their financial gains by a system that he knows no legislator will fight! The fear of a potential lost election or tarnishing a political career will over shadow doing the right thing. For the one who did speak out and any others that might, Kingpin will be there to smear mud all in their face.
I just wish some folks would actually educate themselves about the state retirement system 12:26.
You need to familiarize yourself with PERS Reg 34. Unless you are talking about a local elected official you are wrong. A PERS retiree can return to work for ½ time for ½ pay (for one full time position) as long as they are not a local elected official. As to the latter, the options there are to refuse all salary for the elected position or accept 25% of average compensation as a salary. Under 34 the retiree does not pay into PERS but the employer is responsible for ER contributions on the retiree’s salary. As to the local elected official, ER contributions are on the salary for the position, not the 25%. If the retiree paid a contribution PERS would be on the hook to pay additional benefits. Pat Robertson wrote some time ago about the actual intent of Regulation 34. If you’re willing to do some research you still might be able to find her comments on the PERS website.
Is 34 lawful, sure is. And in my not so humble opinion, if you retire from a state position you retire, you don’t come back part time. If you needed the money then you should have continued working. Don’t know what to do in your spare time? Move into the private sector.
As to your Kingpin, ain’t got a clue about who you are referring to. But never ask a legislator about the retirement system, few if any know what he/she is talking about.
You're right above, none of them know a thing. Our tea party quote machine mcdaniels will enjoy his slurp one day while his sycophants pay his salary, what a joke. Say what you want about Tate, he does seem to be trying. I can't understand if all these clowns are republicans why does this continue? If Fitch had her way, her budget would have DOUBLED by now and there's stuff coming out on her in February that will knock her completely out of any future chance IF she's lucky enough not to be prosecuted for theft. My hands are officially thrown in the air!!
IT innovation reduces the number of Tax Commission workers as more e-filing takes place. Other agencies are utilizing IT (or automation)to replace FTE state worker positions. The state bureaucracy headcount is important to PERS and its headed south. The educational inertia mentioned refers to the lack of marketable job skills in our graduates. School attendance, ACT scores, graduation rates, and college enrollments are slipping while state expenditures for prisons are rising. Our state political failure is broader than just the state pension system.
So, no one's interested in vetting my proposal? I guess I'll continue to sit back and try to get some entertainment value out of this forum, much like a churlish Today Show
This PERS thread does have some good ideas. Gov. Barbour's modest proposals failed to get the attention deserved at the statehouse. Younger workers and new state hires need to have confidence in the PERS. It is the Executive's job to put something on the table to support his workers, insure the rule of law, reasonable taxpayer, and retiree protection. We have heard little from Bryant on this.
Just received the Fall PERS newsletter: "We expect public pensions to continue to get a lot of attention, both at the local level and nationally. However, we are confident that we have developed a road map to put PERS in the financial position to ensure we will continue to meet our obligations to our members, and we refuse to let apples-to-oranges comparisons define us."
Where is the truth??????
KF, I really love the authentication as I am blind in one eye and can't see out of the other.
Gov't mule: Did you read the results of the PERS Study Commission?
11:06
You have to research yourself and arrive at your own conclusions.
If you read John Mauldin, he has looked at public retirement systems. Mauldin referenced one study where PERS of MS was the
6th worst system in the US based on unfunded liability. The State of Illinois wasn't even in the top ten.
9:00; This thread is not about state government failures; therefore, your list is not relevant to the conversation. And if you think there is a need for fewer workers at the State Revenue Department, you're nuts.
The marketable skills of high school graduates has no possible correlation to the subject. Prison expenditures and college enrollments could not be further from the subject of PERS.
State government payroll numbers have continued to grow for fifty years, notwithstanding your claim that advanced IT methodology is replacing state workers.
I suggest your professor at Millsaps should give you a fat zero for your two posts.
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