Monday, July 2, 2018

The Market Came Back but Did PERS in 2017?

Note: Apologies to readers for running several months late with this post. 

Collection of all PERS posts.  

The story of the Mississippi Public Employees Retirement System in 2017 was actually one number- 102 as in 102,260 retirees.  2017 was the first year that the number of PERS retirees went over 100,000.  The result is the deficit between contributions and payments increased slightly even though PERS enjoyed a rate of return of 15%.  Thus PERS stayed stuck at a 61% funding level despite enjoying stellar returns in the market.

The numbers don't lie as the chart posted below shows the basic problem PERS faces. The number of retirees have increased 45% in ten years without a single decline in any year.  The number of retirees was only 56,000 fifteen years ago. 

As payments increase, contributions have failed to keep pace.  The number of contributing employees fell by roughly two thousand.  The contributions from employees and employers in 2017 was $1.589 billion - a decrease of $4.7 million.  However, PERS paid $2.592 billion to beneficiaries - an increase of $110 million, thus creating a deficit of $1.003 billion.  This is the first time that the deficit has been more than $1 billion.  The deficit is a black hole for PERS as it sucks up more and more funds even when PERS has a great year of investments as it did in 2017.  The scary feature of this retiree growth is that PERS caught a little bit of a break as the increase was less than the usual three thousand retirees.  The financial picture of PERS would be worse if retiree growth had been average. 

The money to cover the deficit can only come from investment income and selling assets.  The deficit has grown every year since 2000. It more than doubled in only seven years - the year the Capitol echoed with a chorus of shrieks when Governor Barbour appointed a commission to review PERS.

 Thus the funding level continues to stay stuck in the mud as shown by these two charts.  PERS defenders have said that the funding level would improve "once the markets recovered."  Unfortunately for PERS, the markets recovered years ago but PERS fortunes failed to do so as the growth in retirees torpedoed its balance sheets.

The unfunded liabilities fell all of $10 million in 2017 ($16.812 billion to $16.802 billion) despite the 15% return in the markets.  

A funding level of 80% is considered to be the minimum level for a well-funded public employees retirement program.  The problem PERS faces are structural in nature as stated earlier.  The number of retirees continues to grow.  The contributions are not  enough to keep up with the benefits payments.  Everyone is happy when PERS enjoys a double digit return in the markets but it is unreasonable to expect that to happen on a regular basis.  Mississippi had the tenth worst-funded public employees retirement system in America in 2016 yet no one in Mississippi wants to even discuss PERS. 

JJ wrote in 2016:

The problems for PERS began in 1999 when Tim Ford and his crew decided to increase benefits without, as PERS Executive Director Pat Robertson used to say, finding a way to pay for them.  The stock market would give us double-digit returns forever.  PERS would always be a land of milk and honey for retirees.  Easy enough to do when the number of retirees is around 50,000, not so easy when they are over 100,000.  However, no one wants to discuss PERS.  Its easier to make a two degree course correction 50 miles away from an iceberg than it is to turn 90 degrees when the iceberg is in front of one's face.  However, this is Mississippi where we push off all problems to tomorrow and like our reality to be filled with sand as we bury our heads in it.
A $26 billion portfolio means PERS is the largest pile of money  in Mississippi yet it is virtually ignored by the politicians and the media.  PERS obviously has enough money to pay its bills for quite some time - no one has said otherwise. However, PERS stays stuck in neutral despite its best efforts. 

 Other PERS notes:

Rates of Return
Bonds: 2.39%
Domestic Stocks: 19%
International Stocks: 22.3%
Global Equities: 20.25%
Real Estate: 6.76%
Private Equity: 20.12%
Net Investment Income: $3.4 billion ($131 million in 2016)
Amortization Period: 38.4 years (36.6 years in 2016)

 **Here are the market returns for PERS since 2000:

2000: 8.4%
2001: -7.1%
2002: -6.6%
2003: 3.5%
2004: 14.6%
2005: 9.8%
2006: 10.7%
2007: 18.9%
2008: -8.2%
2009: -19.4%
2010: 14.1%
2011: 25%
2012: 0.6%
2013: 13.4%
2014: 18.3%
2015: 3.5%
2016: 1.16%
2017: 15%

Average Return since 2000: 6.42%
5-Year Return: 10.27%

Assumed Rate of Return: 7.75%


Anonymous said...

i. am. so. tired. of. PERS. stories.

Anonymous said...

It’s a multi billion dollar burden on the state @8:46– and a Ponzi scheme at best.

Still Wearing Double Knit Pants.. said...

The answer is simple and will please JJ to no end. Pay all these bastards minimum wage plus 15%, give them $120 a month at retirement, strip the so-called thirteenth check, abolish the option to provide for a spouse at death and shoot any state employee or retiree who bitches about these changes.

These people are the scum of the earth and smell bad and should not be associated with or allowed to walk around among the general population. Since they are not working in the private sector, their IQ falls between 68 and 101 anyway. None of them goes to church and if you drive by their houses you will see unkempt property and junk everywhere. They work 5.5 hour days and sleep at their desk or while leaning on their shovel.

As has been pointed out here, only 2% of them know how to balance a checkbook and you'd have to search high and low to find one who has a savings of over forty dollars.

Enough of all these experts whining and suggesting various corrections methods. Just implement my plan and all this will correct immediately.

Anonymous said...

The financial health of PERS should be a top issue for The Parents’ Campaign and Jay Hughes. Have either provided any proposals? It’s easy to say “it’s ALL about education” but much more difficult to address a political hot potato like PERS.

Madison Rulz said...

8:46, you should cancel your subscription to JJ since you don't like the content.

Anonymous said...

another PERS story = slow news day.

Anonymous said...

9:26 needs some love. Group hug everyone to 9:26. . . Everything's going to be alright.

Anonymous said...

It seems to me that retirees are not the problem with PERS; they are the sole purpose for PERS's existence. I suspect the real problem is something more along the lines of incompetence, pocket-lining, and plain old not-giving-a-shit.

Anonymous said...

Those of you who think PERS is boring, just wait until it blows up, goes into receivership, and Mississippi's credit rating gets downgraded to JUNK.

Not so boring, then.

Kingfish said...

Well, Kilt, at least you've moved on from beating up on women who rescue dogs trapped in storm drains. Classy.

Anonymous said...

The answer / end result is painful but retirees will be the ones who feel the pinch.

If you work for the state now, plan to retire within 10 years, and you think your retirement is “safe” you are deluding yourself.

Demand that more workers be hired and more money be withdrawn from your pay. Demand that recipients give some and voluntarily forfeit a percentage of benefits a year.

Working together the difficult solution can be achieved....but....reason has no place here

Anonymous said...

I think its unfair to blame the state employees. They are operating within a system that is itself broken and rewards greed. I know many state employees (UMMC) who retire, take their PERS pension, and then go back to work as a consultant, oftentimes doubling their salary. Its ridiculous. But its PERS, baby.

Anonymous said...

Anyone who believes teachers or state employees are underpaid, don't understand the benefits of PERS. Work 25, draw retirement (and work yet another job) for 30. The world's biggest Ponzi scheme and it is taxpayer funded so it will never fail.

Anonymous said...

World and biggest ponzi? That would be social security. They don’t even pretend to tie contributions to ultimate benefits.

Anonymous said...

1151 - don't blame the employees and the retirees! BS.

They are the ones whow flex their voting power to:

1) stop any change to the governing board, which consists of people drawing ftom the trough, or planning their life,around drawing from the trough;

2) scream and shout about any change to the system - i.e. moving to defined comp vs defined benefit like most every other pension system in the country has done (non-government). Hell, evendors the federal government made this change 40 years ago bit our legislators are,afraid of the voting block of all these state workers who know a,sweetheart deal when they are sucking on the tit

3) they are the ones who master the rules -not for good governance but for Pocket lining. Work 20 at anything. Get a fI'll time high pay for four, retire in great lifestyle AND get a Christmas bonus compounding at 3% in a stagnant economy. (BTW, it's that compounding that they slid in that makes the 13th check such a crime against humanity)

And I am a son of a beneficiary that would scream and holler with the rest of them if you touched her 13th present.

Anonymous said...

I have about a 20 percent gain for the year in my E*Trade portfolio. Maybe "they" should move me from JPS to PERS. It's not like JPS is using me appropriately anyway.

cornholio said...

Is it average rate of return or compound annual growth rate you are listing. They can be _VERY_ different figures.

cornholie said...

115.66%/18 periods is an average of 6.43%. However, a more useful number is 5.81% CAGR. As an aside.... this is a way that people can be, and are often, misled about investment returns.

Anonymous said...

Pension funds are required to hold certain amounts in bond funds. If you got 20%+ returns in your brokerage/401k/IRA you more than likely are heavily allocated into equities.

Anonymous said...

Since when is posting a different opinion 'beating up' on someone? If your post speaks admiringly of Kingfish or amen's his theory or opinion, you are assured it will appear here. If not, you have a 50-50 chance. At best.

When a blog starts losing the black crowd and the skirt crowd, the owner will do whatever he can to snatch them back into the fold. lol.

Anonymous said...

"8:46, you should cancel your subscription to JJ since you don't like the content."

How do you figure one SUBSCRIBED to JJ? And since when does one have to be 'classy' to post on this here blog? All you gotta do is send money, take out a paid ad or stroke the owner.

Kingfish said...

Oh yes, its our friend who freaks out whenever someone says a kind word about this website, so threatened he is. He is taking a break from beating up on older women who rescue puppy dogs trapped in storm drains. He needs to go back to worrying about people in Jackson coming to Madison to shop.

Anonymous said...

Your personal animus is showing Kingfish. You shouldn't be so thin-skinned.

"Beating up on old women who rescue puppy dogs in storm drains"? Is that an emotional fallacy aimed at gaining sympathy?

Put on your big boy britches.

I can't afford an add but will send a money order if I don't have to sign it.

Anonymous said...

Just a quick review of threads appearing currently on the blog:

PERS needs money.

The South will go broke under Trump tariffs.

Blue Cross battles UMMC over money.

MO $$ for the children.

Please send money to JJ.

States authorized to collect on-line tax money.

MO money via JPS tax collections.

JPS 5 mil bond money.


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Trollfest '09

Trollfest '07 was such a success that Jackson Jambalaya will once again host Trollfest '09. Catch this great event which will leave NE Jackson & Fondren in flames. Othor Cain and his band, The Black Power Structure headline the night while Sonjay Poontang returns for an encore performance. Former Frank Melton bodyguard Marcus Wright makes his premier appearance at Trollfest singing "I'm a Sweet Transvestite" from "The Rocky Horror Picture Show." Kamikaze will sing his new hit, “How I sold out to da Man.” Robbie Bell again performs: “Mamas, don't let your babies grow up to be Bells” and “Any friend of Ed Peters is a friend of mine”. After the show, Ms. Bell will autograph copies of her mug shot photos. In a salute to “Dancing with the Stars”, Ms. Bell and Hinds County District Attorney Robert Smith will dance the Wango Tango.

Wrestling returns, except this time it will be a Battle Royal with Othor Cain, Ben Allen, Kim Wade, Haley Fisackerly, Alan Lange, and “Big Cat” Donna Ladd all in the ring at the same time. The Battle Royal will be in a steel cage, no time limit, no referee, and the losers must leave town. Marshand Crisler will be the honorary referee (as it gives him a title without actually having to do anything).

Meet KIM Waaaaaade at the Entergy Tent. For five pesos, Kim will sell you a chance to win a deed to a crack house on Ridgeway Street stuffed in the Howard Industries pinata. Don't worry if the pinata is beaten to shreds, as Mr. Wade has Jose, Emmanuel, and Carlos, all illegal immigrants, available as replacements for the it. Upon leaving the Entergy tent, fig leaves will be available in case Entergy literally takes everything you have as part of its Trollfest ticket price adjustment charge.

Donna Ladd of The Jackson Free Press will give several classes on learning how to write. Smearing, writing without factchecking, and reporting only one side of a story will be covered. A donation to pay their taxes will be accepted and she will be signing copies of their former federal tax liens. Ms. Ladd will give a dramatic reading of her two award-winning essays (They received The Jackson Free Press "Best Of" awards.) "Why everything is always about me" and "Why I cover murders better than anyone else in Jackson".

In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.

In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

Trollfest '09 is a pet-friendly event as well. Feel free to bring your dog with you and do not worry if your pet gets hungry, as employees of the Jackson Zoo will be on hand to provide some of their animals as food when it gets to be feeding time for your little loved one.

Relax at the Fox News Tent. Since there are only three blonde reporters in Jackson (being blonde is a requirement for working at Fox News), Megan and Kathryn from WAPT and Wendy from WLBT will be on loan to Fox. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both and a torn-up Obama yard sign will entitle you to free drinks served by Megan, Wendy, and Kathryn. Get your tickets now. Since this is an event for trolls, no ID is required. Just bring the hate. Bring the family, Trollfest '09 is for EVERYONE!!!

This is definitely a Beaver production.

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Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

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