Here we go again at PERS, the state employee retirement system.
Despite last year's promise to legislators that a boost in employer contributions would right the ship, the ship sank again in FY 2019. The latest Actuarial Valuation Report (delayed until after the election) showed PERS' unfunded pension liability jumped up $1 billion, from $16.9 billion to $18 billion.
The funded ratio also dropped from 61.8% to 60.9%. The extra $100 million annually from increased employer contributions was supposed to reduce the shortfall and move the funded ratio upward, hitting 100% in 30 years.
While some changes to actuarial assumptions impacted calculations, PERS' big problem remains growing numbers of retirees but decreasing numbers of employees. Over the past 10 years the number of retirees jumped 42% while the number of employees fell 9%.
Significantly, the payout to retirees since 2010 jumped from $1.4 billion to $2.6 billion, up 89%; annual payouts for 13th checks (accumulated cost of living adjustments) more than doubled from $330 million to $683 million, up 107%; and the unfunded liability increased 59% from $11.3 billion.
PERS actuaries regularly tell the board that if their measured assumptions come true, things will become shipshape over time. Unfortunately, as results show over the past 10 years, their liberal assumptions often miss the mark.
Should the downturn continue through this year, PERS will have to increase employer contributions again, estimated by the actuary at 18.97%. Remember, much of any employer rate increase gets pushed out to cities, counties and other locally funded governmental entities.
Gov. Haley Barbour spotlighted PERS' financial problems back in 2011 when he appointed a special commission to recommend changes "to ensure the solvency of the fund." A key Barbour goal was to reduce the employer contribution rate which was 12% headed to 12.9% at the time. Instead it keeps going up and up.
The commission recommended a number of changes to turn PERS around. Key among them were:
1) Freeze 13th checks at current levels for three years and tie future increases to the Consumer Price Index with a cap of 3%.
2) Balance membership on the PERS board currently dominated (10 of 12) by plan participants.
3) Make participants eligible to draw full retirement at age 62, or at age 55 with 30 years of service or more, but with no COLA adjustments until age 62.
4) Base final average compensation of a PERS retiree on four consecutive years of service based on the employee’s base pay. And study whether or not it is appropriate to include unused leave, overtime pay, special pay, and per diem and travel (in the case of legislators) as part of an individual’s final average compensation.
5) Revise all statutes related to PERS that allow for “spiking,” stacking of salaries, or other abuses within the PERS plan.
6) Form permanent legislative committees to oversee PERS with professional staff knowledgeable of actuarial science and retirement plan requirements and resources to hire independent actuaries.
Virtually none were pursued or adopted by the Legislature or the PERS board. Since then, political pressure from retirees has forced candidates for both to pledge there will be no changes at all to their benefits.
So the PERS ship keeps sinking.
For a comprehensive report on PERS see the Jackson Jambalaya blog (http://kingfish1935.blogspot.com).
"False weights and measures – the Lord detests them both" – Proverbs 13:22.
Crawford is a syndicated columnist from Meridian.
Sunday, February 2, 2020
Bill Crawford: Despite Cash Infusion, PERS' Ship Keeps Sinking
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37 comments:
Anyone with a pea for a brain can see that the main problem is the PERS Board. There is an obvious conflict of interest when the board members are also participating in the plan, and there is no way to address PERS financial plight until the plan participants are removed from the board.
I put up with a lot of Sh#t from people for 25 years just to get that check.
The can shall be kicked. Millennials will suffer. Thanks boomers.
We’ll just try harder.
Just like the national debt - kick that can down the road.
Will the last one to leave the room please turn out the lights-
Just payout a percent to all who are in it now and have paid into the fund and close it. Tried to tell you years ago, go with a 4% annual return on estimated investments and tie an increase to what social security increases and do away with 13th check. Time bomb and nobody wins. Why do they still use an average return in the 7.5% range? Look at the last 15 years average.
@8:54AM - you are welcome. I've got mine, suckers. Love that 13th check.
State employee and fine with all of the above as long as there is a five year buffer for those close to being able to retire. They shouldn't have to drastically change their plans. (I'd also add capping the highest salary.)
"5) Revise all statutes related to PERS that allow for “spiking,” stacking of salaries, or other abuses within the PERS plan."
This phenomenon is the real culprit....if anyone would bother looking at the last 10 years, it's exactly what has been happening by the old-timers with huge unjustifiable administrative salaries. They got out before anyone caught on to their scam. Where's Shad White?
PERS is the #1 financial issue facing the State of MS and it’s not even close. But there does not appear to be anyone in high elected office who is willing to tackle the challenge.
The longer they wait to fix the problem, the harder it will be to fix.
Retirees depend upon their benefits but the taxpayers are not a rock from which water can be drawn without limit.
8:42
MANY people put up with ALOT of that throughout their working in the PUBLIC sector for much longer spans... PLUS they had to be accountable AND productive... or they'd lose their jobs -- NO AUTOMATIC PROTECTION or GUARANTEES.
Government employees survive with that "shield" around their own little fiefdoms.
My wife and I are both retired and depend on Pers. But the annual COLA should be stopped immediately until Pers becomes sustainable. Also Legislative retirement should be eliminated. Serving as a State Senator or Representative was never intended to be full time. And further indignity is allowing legislators to add there expense/travel reimbursement as part of their base for formulating retirement benefits. I will begin calling Pers board members as should all current and retired state employees.
The Dow Jones ind. avg. was up 21% last year. The bond market was also strong. This retirement fund is hemorrhaging. Who is managing this fund and why are they still managing it? It may come as a surprise, but you can,t buy your way out of debt. It is inevitable that the taxpayers (not the participants) will be forced by legislation to “bail them out” again.
Tate will solve it! After all he knows all about the problems....since he created them.
The problem with letting the mob vote is that they will always elect to vote themselves the treasury. Universal suffrage by unqualified electors is a financial suicide pact.
How does PERS earn investment returns that are a small fraction of the overall market?
12:36 - of course you hate Tate, but comeon, be reasonable. He did not create this mess.
The Compounding of the so-called cost of living adjustment (the COLA, which is guaranteed at no less than 3% no matter what the real COL is) is ridiculous, and it was done in 1999 under Governor Musgrove along with the legislature that at the same time created their 'special' benefits - because, of course we all know - they are 'special'. All of a sudden became full-time, get paid salary and a half, get their travel and their per diem (expenses, not salary, but don't worry about those details folks - we are taking care of a third of the voting public with their 13th checks).
If you want to blame Tate, at least do it about something while he was at least in some public office, not while your boys and girls were running things.
Every legislature that sits without addressing this should be criminally prosecuted when the thing is broke. Each of you is willingly and knowingly making financial promises you can't keep. What is the difference in these elected officials and Lamar Adams?
Or Bernie Ebbers?
"Every nation gets the government it deserves".
-Joseph de Maistre.
This applies quite aptly to the State of Mississippi. If it's electorate keeps voting for dirt dumb rednecks with law degrees that only care about power and access within the stone-age culture of the state, then that is what they will get - and coincidently, presently have - nothing but inexperienced, simpleton good ole' boy/girls getting rich off of their government job - while the people's business does not get accomplished. The state really needs a comptroller of its currency that is pouring down the drain in almost every executive branch agency. But hey - just seven more months until football season! Morons run Mississippi, who were elected by good Christian morons.
You think it's bad now. The market is at an all time high and interest rates are historically low.
When the next downturn hits PERS is in real trouble.
Wonder how the board members and people associated with this mess do it. I mean, how do you intentionally allow something to be such a failure?
"MANY people put up with ALOT of that throughout their working in the PUBLIC sector for much longer spans... PLUS they had to be accountable AND productive... or they'd lose their jobs -- NO AUTOMATIC PROTECTION or GUARANTEES.
11:30 AM"
Damn 11:30, what agency did you work for ?
I retired from a very large State Agency and couldn't even get rid of my worthless "non status" employees.
And as you know, the State does have a lot of very hard working people.
But for every one of those types, there are two worthless ones.
This is the norm in all State agencies.
One idea . . .
Abolish the State Personnel Board and their "protection" along with getting rid of the Legislative "SLURP" retirement plan.
This would have no effect on the current financial mess, but at least it might be a start for the future of PERS.
What makes this guy an EXPERT on EVERYTHING??
To 11:57
There their
Hope you and your wife weren’t teachers.
If she was, let her proof read your post next time.
Is there anything in this 'article' that is new information, or, is it a regurgitation of everything that this blog posts every three months on this subject just to stir up the low-information crowd?
Kingfish loves these quarterly bullshit PERS non-conversations, most of which are inundated by posts from the low-information crowd and others who think they hate all public employees.
I agree, for many reasons, with the poster that legislators should not receive retirement pay.
I agree with the poster that it should be easier to fire worthless state employees.
Years ago I learned of a retired state employee who named a young child as his beneficiary rather than the typical spouse. This seems to be contrary to the spirit of a retirement system. One can certainly see if this was widely done there is no way the retirement system could be sustained.
Most of my post don’t get posted. Maybe this one will.
Funny how you always bitch and moan yet never refute anything. Never cite any numbers, all you do is just throw out trash.
6:26- I know you take yourself seriously and think you are smarter than the average "low information" poster here. You're not!
This is a known issue for which the legislatures are too lazy and too cowardly to attempt to correct.
Those, like yourself, who can't do math or who do not know how to calculate the impact compounding COLA adjustments will have on the PERS fund are part of the problem.
Sticking your head in the sand doesn't make the issue go away.
Should be obvious that 6:26 is a PERS recipient and would like for these conversations to not happen.
Shad White will not fix anything. He's in it, to win it.
7:30 - the correct word is legislators, not legislatures.
When was the last time the honorable Kingfish offered a suggestion? Oh, wait! We were told just last week his job is to report, not to offer solutions.
I don't bitch and moan. I just state the obvious. Kingfish, like most of the low information crowd, despises employees in the public sector yet he never shuts up long enough to realize who and how many of them there are upon which he counts day and night.
The State does benefit from having more employees that are not needed as they pay into the retirement system. How many 80+ year old people are amazed at the 13th check. That 13th check should right now start going down 10% compounded a few years until the fund stabilizes. Also COLA needs to go down when social security and military retirement kicks in.
Somebody has to be a big boy and say no to the children who want to eat it all up. Just because they have been getting it doesn't mean it can be that way for ever.
How much does it cost you to enjoy all these insults Kingfish?
The PERS problem is simple:
1. Eliminate the SLURP
2. Eliminate increases in reverse chronological order until it is solvent assuming a reasonable 4% growth rate and with employer contributions capped at a reasonable rate. 15% would be more comparable to other retirement plans.
Problem solved. State employees should not expect returns that would bankrupt the plan. The added benefits should never have been legislated through the years.
I agree with you about abolishing SLRP. However, it's only $25 million or so. Not even a drop in the bucket for PERS. In other words, abolishing it is a matter of good public policy, not because it will improve PERS finances.
Eliminate SLURP, revise the rules regarding part time legislative pay, combine all of those under the PERS umbrella into one program thereby eliminating the MHP early-out program, fire the contracted money managers who are ripping off the system, revamp the board to eliminate gubernatorial appointees and the state treasurer (who has never done a damned thing to improve the system), develop a true COLA system and stop calling it a 13th check which it is not, disband the deferred Comp plan and allow participants to elect to put such contributions into the regular PERS system, forbid any legislator from sponsoring any bill that would make funds in the PERS system available for any other purpose, delete the ability of ex-service members to count toward retirement four years of activated service while also using those same years toward national guard and armed forces retirement, publish an exhaustive list of each and every job title throughout the state that falls under the purview of PERS in order to educate the low information crowd. Just for starters.
There's my bitch and moan for the day.
SLURP represents only twenty or thirty or fifty million dollars. As relates to cost savings, that amount is not worth fooling with. You can tell Kingfish has never held a real job in the private sector. Tell that to any company CEO and see how long it takes your cardboard box to arrive.
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