Jackson Jambalaya

The Clarion-Ledger editorial page called PERS "successful" yesterday:
"Legislative leaders have sought to sweeten retirement benefits to make public service more atttraictive to many who must sacrifice financially to serve and to retain experience.

Ironically, that is the one reason PERS exists as it does and why it is so successful."

The editorial finishes with this example of positive reinforcement:

"Mississippi has a good retirement system that attracts for quality employees."

No surprise the newspaper would weigh in on PERS as the debate about the PERS Study Commission heats up. The Democrats charge the Republicans are trying to rob retirees. Some Republicans say PERS needs to change from a defined benefit (pensions) to a defined contribution (401k) system. Others say they are just trying to stabilize PERS. Lost in all the debate is some semblance of what the true picture is of PERS. JJ filed a public records request for the PERS audits of 2000, 2002, 2004, 2007, and 2009 (The audits usually contain much information from the prior year so they were not requested.). Here is part of the PERS portrait after reviewing the financial statements.

PERS defenders claim it holds $21 billion in assets- a true statement shown by the chart below:

PERS officials Pat Robertson, Greg Gregory, and Lori Tingle went before the legislature last week for the annual budget request. PERS sought a budget increase of only $106,173. The hearing quickly turned from a presentation on the financial shape and profile of PERS to a debate over the PERS study commission created by Governor Barbour (See note at end of post before reading any further.

The session was colorful at times as Democrat Representatives Steve Holland, George Flaggs, and others used the hearing as an excuse to attack the commission.

Notes from videos: 29:40 of Part 1 and beginning of Part 2: Holland attacks commission in rather colorful fashion. Its worth watching. Another legislator 17:00 wants to make consultants employees. Um yeah, financial experts who handle multiple portfolios for large clients such as PERS will give all that up to go work for a state salary. Yeah. Cecil Brown starts at 20:20 in Part 2. Cecil then brings up converting retirement system from defined benefit to defined contribution.

Senator Dean Kirby (commission non-voting member) starts at 23:30. This is the part where Senator Kirby says the Commission Chairman said they would not touch the 13th check. Um, not so fast as the video posted on this website two weeks ago shows no such thing and in fact at the end of the hearing, the Chairman pointed out the large expense spent on the 13th check. The Republicans follow up behind him.

Part 3 at 2:03: Ms. Robertson points out the problems with the 1999 increase in benefits passed by the Legislature. Senator Hewes and Ms. Robertson have a nice exchange at 8:30 on Part 3.

Highlights:
-PERS Commission funded by federal stimulus dollars
-2010 audit states PERS is 64% funded
-PERS has $21 billion of assets
-PERS paid $409 million more in benefits than it received in contributions in 2010.
-Watch Tim Medley & Sam Valentine's testimony in Part 3 at 3:20
-Earlier post on PERS Investments

The PERS Commission held a hearing for public comments Wednesday afternoon. Governor Barbour appointed the commission to study the Mississippi Public Employees Retirement System citing a need to ensure the long-term stability of PERS. Controversy arose when the most recent audit of PERS revealed it was funded at a level of 64%.

Gulport Mayor George Schloegel chairs the commission and is the former President of Hancock Bank. The Mayor stated the commission was funded by federal funds provided to states to review their retirement systems. Just in case Cottonmouth did understand that statement, JJ asked Laura Hipp, spokeswoman for the Governor's office about the funding source. She replied in an email: The PERS Study Commission is using $250,000 of federal fiscal stabilization funds. These were part of the federal stimulus dollars given to the states to stabilize state finances."

Before we get started on what took place at the hearing, here are the basic facts about PERS according to its most recent audited financial statements and Executive Director Pat Robertson's comments at a May luncheon videotaped by this website. All figures are based on the financial statements for the year ending June 30, 2010. READ THIS BEFORE YOU READ ANYTHING ELSE.

Employees: 165,644
Average years of service is 31
Average age is 59.

Asset allocations:
47.8% in US equities
25.4% in debt securities
4.6% in real estate
19.5% in non-US equities

Total assets: $21.2 billion on May 1,2011, $17.1 billion in 2010 ($15.5 billion in 2009, $19.7 billion in 2008).

Investment rate of return: 14.1% for 2010.
3-year rolling average: (5.5%)
5-year rolling average: 2.1%
10-year rolling average: 2.3%
20-year rolling average: 7.4%
30-year rolling average: 8.7%

Investment performance 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%

Current funding level of actuarial accrued liability: 64.2%. Ms. Robertson said 80% is considered to be the "benchmark of a well-funded plan." Ms. Robertson stated at the May 3 luncheon PERS' accrued liabilities have doubled since 1998 (thanks to the legislature's increase in benefits in 1999 with no additional improvement in "funding mechanisms"). 2010 audited financial statements

Page 8 of the 2010 audit states PERS spent $409 million more in benefits payments than it received in contributions although that does exclude the $2.1 million income from investments. PERS lost $3.7 million in investment income in 2009.

Mayor Schloegel said the mission was to audit the system and "make recommendations to the next administration" and legislature and the objective "is to ensure the retirement system is sound over the long haul." He introduced the commission members, made an opening statement, then moved on to public comments. The room was packed with over 100 people in attendance. Retirees and PERS members comprised most of the audience.

The comments had a common theme after awhile: The State of Mississippi should honor its commitments to its retired employees. The retirement system was a strong recruiting tool used by agencies. Retirees are on fixed incomes and are squeezed by inflation. Here are some comments made at the hearing:

*Brenda Scott, President of the Mississippi Alliance of State Employees: "No one should be making scapegoats of public workers..... It is reckless to propose a change in the pension plan when it is more costly to administer and shift costs to employees." (23:00)

*Carolyn Smith: President of Retired Education Personnel of Mississippi. "We have a great retirement system..... We strongly believe the PERS Board should continue to be elected by the members of PERS and the Executive Director be appointed by the board. (28:00)

*Ann Thames: Former employee at Department of Mental Health. Advocated keeping the system as it is. She told the commission the retirees are taxpayers as well. She told Senator Kirby 1,163 employees worked in his district and Mr. Stone had 452 employees in Lauderdale County. (33:00)

* Dr. Phillip Burchfield :Superintendent of Clinton Public Schools. "It is our hope the current make-up (of the board) is not changed... Moving away from a defined benefit plan would have major ramifications. Perhaps as many as 50% would either not participate in the plan or when changing jobs would withdraw funds and spend them on frivolous expenditures.... If we switched to a defined contribution program, there is no way the fund could sustain itself." (42:15)

*Kevin Gilbert: MAE. Oh heck, just WATCH this clip at 49:31 and all of Part 2. Words can't begin to describe his thundering, and I do mean thundering, oration.

*Tim Medley. Investment Advisor. Made some great points. Served 18 months in 2007 as a non-voting member of the PERS board to fill an unexpired term. Made three observations. "The state retirement system is underfunded. I am aware the staff of PERS takes exception to this..... I do think we have a problem. Second observation is this
assumed rate of return of 8% is I'll say, ambitious..... The governing board needs to have more investment professionals. Of the ten members of the board of trustees, there are two that have investment backgrounds (and will reduce to one when Tate moves up). If you look at Washington State, which is 99% funded, they have ten voting members and five non-voting members. Those five all have extensive investment backgrounds. North Carolina has an investment advisory committee that meets four times a year. It has six members. Five of those members have an extensive investment background. We should increase the funding for the investment part. The state of Mississippi has one, just one chartered financial analyst to handle $20 billion. I know they use outside consultants but they have one. Washington State, they have alot more money. They have 75 investment consultants. PERS should have at least ten. ...." (3:20 of Part 3. Worth watching. About the only one who really talked numbers).

There are more comments in the videos posted below. Mayor Schloegel said no recommendations would be made until after the elections so the issue could not be turned into a political football. The commision retained the actuarial firm of Gabriel Roeder & Smith to act as a consultant. The firm serves as actuary for 29 statewide retirement and healthcare plans and is the largest consultant in its field nationwide.

I will write up my post about the PERS Commission later today but here is the video of the entire hearing.