The Sacred Cow of Sacred Cows in Mississippi continues to spiral out of control. The Thirteenth Check mushroomed to a record $800 million in 2021 as the PERS annual cost of living adjustment shot up $48.5 million.
The graph shows the COLA is fizzing towards $1 billion. PERS actually caught a break on the annual increase but it was a small break. The annual increase fell by $3 million instead of rising by its usual $2-3 million. Unfortunately, the COLA will probably reach $1 billion in 2025. The COLA was only $402 million in 2012.
The COLA is not a traditional cost of living adjustment based on inflation but is instead a
guaranteed increase in benefits that is compounded annually. The economy could
enter a period of deflation and the "cost of living adjustment" would
still increase. The PERS Retiree
handbook explains:
PERS retirees and beneficiaries who have been receiving benefit payments for at least one full fiscal year are eligible to receive an annual Cost-of-Living Adjustment (COLA). If you retired effective July 1, you would be eligible for the COLA during the fiscal year beginning 12 months later on July 1. If you retired effective August 1, you would be eligible for the COLA during the fiscal year beginning July 1, 23 months after the effective date of retirement.
The COLA is equal to 3 percent of your annual base benefit for each full fiscal year of retirement prior to the year in which you reach age 55 (Retirement Tiers 1 through 3, see table below) or 60 (Retirement Tier 4), plus 3 percent compounded for each fiscal year thereafter, beginning with the fiscal year in which you turn age 55 (Retirement Tiers 1 through 3) or 60 (Retirement Tier 4). (See the Appendix for simple and compounded COLA interest rates for years in retirement.)
It's a sweet deal if one can get it. Unfortunately, the retiree floodwaters rose to a record population of 112,158 in FY 2021. More retirees means more COLA checks. More COLA checks means $800 million. The deficit between contributions and payments grew to $1.3 billion last year (It was "only" $642 million ten years ago.) Thus the COLA makes up 60% of the shortfall.
Governor Haley Barbour created a PERS study commission in 2011 amid much opposition. JJ reported on December 15, 2011:
*COLA. The infamous but dearly-beloved COLA. The commission recommended freezing the COLA for three years. Mayor Schoegel said the amount of the COLA payment was $409 million. The amount of the COLA payment is roughly the same amount as the deficit between contributions and benefits payments (See earlier post about deficit). The Commission stated retirees would STILL GET THEIR THIRTEENTH CHECK. The Commission only recommended freezing the amount for three years and then tying it to the inflation rate (consumer price index. Interesting question: Should it be tied to CPI or instead tied to the headline inflation rate?).
The commission estimates this change would improve the funding level to 67% and reduce the employer contribution rate by 2.12%. The consultant estimates PERS pays an extra $10 million per year because the COLA is not linked to the CPI. The commission also pointed out the COLA is 3% a year for the first three years but is compounded after that period. The result is the COLA is determined each year on a retiree's principal that increases each year.
The recommendation disappeared into a well of silence. The Democrats said there was nothing wrong with PERS a "return of the markets" would not cure. However, PERS didn't come back when the markets did as funding level stalled when PERS enjoyed 25% and 32% returns. The two State Senators who dared to merely discuss PERS lost their seats in 2019. Lesson learned. All politicians in Mississippi now kiss the PERS golden calf and promise not to touch the Thirteenth Check even as it spirals out of control.
Annual PERS COLA (Increase from previous year)
2021: $800,170,000 ($48.5 million)
2020: $751,646,000 ($51.7 million)
2019: $699,947,000 ($50 million)
2018: $650,465,578 ($47 million)
2017: $603,318,841 ($43 million)
2016: $559,888,063 ($43 million)
2015: $517,283,072 ($41 million)
2014: $476,401,043 ($38 million)
2013: $437,808,691 ($36 million)
2012: $402,514,750 ($33 million)
2011: $368,645,000 ($30 million)
2010: $338,628,000 ($25 million)
2009: $312,471,000 ($31 million)
2008: $281,124,000 ($25 million)
2007: $255,939,000 ($23 million)
2006: $232,710,000 ($22 million)
2005: $211,530,000
38 comments:
Radical reformation while there is still time or haircuts. The current trajectory is unsustainable.
KF
I applaud your efforts but you have to boil it down further.
Somehow you have to find an easily digestible simple picture or graph which demonstrates how taking more from less spells disaster.
Nothing to see here! Please disperse! Move along!
A great study would be to check how much PERS is underfunded now versus how much it would be underfunded if the 13th check had never been implemented.
A great study would be to check how much PERS is underfunded now versus how much it would be underfunded if the 13th check had never been implemented.
Very good suggestion.
However, if there hadn't been the 13th check scheme you can bet that PERS pot of money would have been tapped and spread out by the politicians with a different scheme.
Calling commenters asshats is a great way to make sure your comment won't be approved.
As a retiree I have to agree that my retirement check is more important than the 13th check. I have never understood why people select to wait until December to receive the cola instead of receiving it each month during the year. Probably it’s for people that have never developed. monthly budget😩!
I am a retired PERS beneficiary. I would point out that:
1) As a retiree, I can take the cost of living increases monthly (adding 3% as a monthly amount) or take it as a lump sum in December (“13th check).
2) As a social security beneficiary (over 66), I received an approximate 6% increase over last year added to each month’s social security benefit as a cost of living increase.
Surely, no one can argue that 2015 money buys the same amount today as it did then. I am a loss to see why there is opposition to the 13th check. PERS retirees do not get both a COLA benefit increase monthly plus the 13th check. It is an either/or proposition. The only difference is that of timing — incrementally as a monthly benefit or a year end benefit. One could argue that it actually SAVES the state money to pay out 13th checks annually since it gets to invest the money longer.
If you want to take away my 13th check, please give me all my contributions, my agency contributions, and earnings for time I put in with PERS. I will take that money estimated to be in excess of $1.4 million and I will invest it just as I have with my other retirement savings. Or, let me have my 13th check and shut up.
I would like to see what the burden on PERS is from enhanced benefits available to legislators. Ordinary State employee cannot draw PERS benefits without at least 20 years or more of service, and then the payout is 50%-60% of their pre retirement salary average for the four highest years. Legislators can draw after only 4 years of service. Also there are many PERS beneficiaries who earned a negligible salary for 15+ years as a school board attorney or other low paying government job, then landed a high paying State job or appointment for 4-5 years. They then get PERS benefits based on the highest paying job. It’s just another way for the well connected to game the system. Reform these things that benefit the insiders before punishing everybody with changes to the 13th check.
Compounding interest gonna compound.
The last anonymous reply was correct. I saw many Illinois pensioners (physicians) jerry-rig the system and almost double their payout by changing their job appointment the last four years before retirement.
Lots of jealously and ignorance in these posts. If you don’t like it, demand that it be fixed going forward. Otherwise the haircuts will be in the form of increased taxes or state contributions.
Any elected leader who kicks the can down the road under the assumption we’ll cut previously earned benefits is as guilty of fraud as Lamar Adams. And as immoral.
The reason this thing is so dangerous?
The state guarantees it through higher taxes.
So get ready
A COLA for retirees is only fair (common sense?). Social Security does the same thing.
A COLA adjustment is fair when there is actually inflation. The PERS COLA needs to be tied to some index and not be an automatic 3% increase. Here is the inflation data since 2000. I'm sure you may find this data by another source that may differ somewhat.
2000 3.4%
2001 1.6%
2002 2.4%
2003 1.9%
2004 3.3%
2005 3.4%
2006 2.5%
2007 4.1%
2008 0.1%
2009 2.7%
2010 1.5%
2011 3.0%
2012 1.7%
2013 1.5%
2014 0.8%
2015 0.7%
2016 2.1%
2017 2.1%
2018 1.9%
2019 2.3%
2020 1.4%
2021 7.0%
Hey, 4:01!
As a PERS retiree, I am absolutely on board with your suggestion to tie the PERS COLA to actual inflation ..... for as long as Sleepy Joe Biden is president.
The "high four" is the most egregious rule that somehow gets no attention. Pay into the system for 21 years at a low rate, get appointed to a sweet heard job for 4 years and get paid for the rest of your life based on the higher salary. That's just wrong. But again, fix it going forward to cut the losses.
Keep dreaming and burying your head in denial but NO pension guarantee is absolute.
What is the average age of a PERS retiree? At some point there will be a few years where more than average pass away and bring balance to the outflow.
@1:46pm wrote “If you want to take away my 13th check, please give me all my contributions, my agency contributions, and earnings for time I put in with PERS.” Sorry, “my agency contributions” aren’t earned nor yours to have. Those are the taxpayers’ contributions, paid by increases in your agency’s budget and allocated by the legislature from the taxpayers. You only get your contributions and interest back. Won’t be anywhere close to $1.4M since agency contributions (i.e. taxpayer money) make up the bulk of PERS contributions.
Pay up or shut down.
If the legislature does anything short of fully funding PERS, then every single State Employee should strike. Shut the entire state down.
You need to really look at the Legislature’s retirement plan called “SLURP”. Makes PERS State Employees retirement look paltry.
Don't cancel the State income Tax,
Need that coin to pay the people who have earned their State Pension.
Wanna change it? Change it for new hires that agree to the terms of employment at the time of hire, I did.
I completed 33 annual contracts under Tier 1 of PERS.
I fulfilled my obligations for 33 years, State needs to fulfill their obligations.
@4:55. Thank you. This issue steams me. And it will never be solved.
The real question: does the legislature have the final say on PERS?
Or maybe the issue is - as I was told by a legislator - "you'll never see a substantial change to PERS in an election year."
It's always an "election year." The part-time legislators will continue to SLRP it up, and, unfortunately for the full-time state employees who are counting on retirement benefits from PERS, the can will be kicked down the road.
50 million here, 50 million there.
Pretty soon it becomes real money.
4:05 I can average those numbers. Just wondering why you didn't.
PS: Nobody on this page or elsewhere can point to a single state tax increase he/she has ever experienced in order to fund PERS or anything else. You lettuce-heads who think you're experiencing tax burdens to fund PERS are out to lunch....as well as being 'steamed'.
Instead of Gunn and Hoseman fiddle-fartin' around with tax elimination (aka running for governor) use all your 'flush cash' to enact a correction to the PERS plumb-bob.
The re questions should be:
“How does PERS fit into the pending economic paradigm shift?”
Agenda 2030
Agenda 2050
Net Zero
Race to Zero
Build Back Better
WEF - Davos/Cyber Polygon
It is all accelerating.
You won’t be able to buy any new vehicles except an overpriced EV within the next two years.
You will pay your carbon taxes and you will work to maintain your social license to live in a society.
And you will eat whatever the government gives you because you will be so hungry!
You Will Be Happy!
Just eat your 🐜 🐛 🕷
"The current trajectory is unsustainable. March 1, 2022 at 12:45 PM"
Most of the goobs commenting here have no idea that the legislature caused this problem by defeating the required balance between contributing employees and funds available for investment.
For decades the legislature has exempted certain agencies from SPB coverage, allowing governors and agency heads to terminate employees without recourse. Here's what that caused:
1) Allowed agency heads to get rid of (non)favorite employees who were viewed as on the wrong team.
2) Allowed the retention of favorite sons (and daughters), figuratively speaking, who were then later moved into cush jobs at the four-high rate, who then retired much higher retirement pay, thus impacting not only the base funds available but the COLA draw-down.
3) Allowed agencies to call back retirees on contract thereby negating that position's paying a dime into the retirement system by draining agency funds nevertheless.
4) Allowed the state to eliminate a huge number of PINS (position identification numbers), again reducing the number of contributors in the pool.
5) failing year after year after year to increase pay, thereby causing constant turnover with employees leaving for the private sector and the invlux of new employees that have to be trained until they are able to leave the system.
@ Kingfish: "It's a sweet deal if one can get it."
You sound jealous. It's not hard to get. All you have to do is become a public employee in MS and work there for 30 years. Go ahead - there are job openings. I have confidence you are qualified for at least 3 of them.
@ March 1, 2022 at 1:46 PM: "One could argue that it actually SAVES the state money to pay out 13th checks annually since it gets to invest the money longer."
Nope. With the monthly, PERS pays out half your COLA in the first half of the FY, and the other half in the last half of the FY. With the 13th check, PERS pays out the whole COLA right in the middle of the FY. So assuming a constant ROR, it's a wash.
Speaking of the high 4 and legislators, look at our most recently retired head of the MS Dept of Revenue/Tax Commission. He worked as a teacher & coach on the coast for years building up his PERS time, then worked 24 years as a state legislator getting his SLRP retirement in as well as working in the private sector, in addition to the lucrative per diem. He was a good boy and got appointed to head of the Dept of Revenue/Tax Commission. Herb is a good guy, but he has no experience in that field other than possibly being a real estate appraiser. I am sure that was a buddy/buddy appointment. He retired after exactly 4 years. The majority of his Pers/SLRP years were a part time gig but he is set for retirement based upon the salary of Head of the Dept of Revenue at roughly $150,000. Now he is a lobbyist with Phil Bryant's outfit.
Herb is easily retired at 95% of his most recent salary and with the incoming COLA bumps will be retired at almost 200K withing (my guess) six years - and add SLRP and SS to that! I don't know his age, but he's set...as if he wasn't 'set' for the past twenty years.
Say it with me...IT AIN'T WHO YOU KNOW...
Meanwhile...look again at the average state retiree annual draw including COLA.
March 1 @ 3:37 suggests 'the state guarantees (it) through higher taxes'.
Oh really? That comment displays sheer ignorance. Cite the last time your taxes were raised in this state for this or any other purpose! Don't bother...It's never happened.
Someone asked for the average age of state retirees. I'm sure that number is out there somewhere. However, when you consider that the employee can retire with 20 but not before he reaches age 60. What's that do to your 'average' inquiry?
And to retire younger than age 60, one has to have 30 years, which would indicate a minimum of around age 51 or so.
Without knowing exactly, I'd speculate that the average age of current retirees is somewhere around 68 and the average age at which they retired? Again speculating...65.
If you were trying to suggest an average retirement age at 50, you were miles off! Also remember, no state retiree carries his insurance coverage into retirement unless he chooses to do so and pay handsomely for it.
@ March 2, 2022 at 8:26 AM
You hit it dead on the head!
Add more fuel to the fire, there are now more state employees eligible for retirement than short-tenured employees. (People with less than 10 years of service)
State income taxes are not a retention issue for people leaving Mississippi
It's bad decision after bad decision by inept leadership running this state, that's making young folks leave this place for greener pastures.
It's not even comprehensible to try and pass tax legislation that's similar to Texas and Florida when we are not even generating the same kind of revenues as those two states.
Mississippi State employees make a conscious choice to stay here and make this place home, at the bare minimum they should be paid a decent wage, instead of being treated as enemies of the state.
State employees aren’t paid much. Look at the web site where openings are listed and look at the salaries. Those that choose to stay working for the state do so because of the retirement plan, so in effect, they are receiving their pay later in life. As some posters have mentioned, there are some ways to help shore up the fund, but the politicians and well connected don’t want that, because they benefit most from it.
One more thing, elected officials have 30 days a year added to their service time for “sick time and vacation”. How does that make sense?
7:39 - A bird will always build her nest as strong as possible. It's called 'feathering your nest'.
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