Sunday, October 28, 2018

Bill Crawford: PERS Sees Taxpayers as Evergreen Money Tree

The PERS Board of Trustees seemed happy after hearing from their actuary. The funded ratio for PERS increased and investment returns were up.

So, are things turning up for PERS?

Only if you don’t mind your pocketbook getting raided.

Here’s the story. As the actuary report highlighted, PERS’ funded ratio moved from 61.1% to 61.8% (the minimum prudent level is 80%), investment returns for the year hit 9.16%, and wage increases were less than expected. But, as the report did not highlight, significant trends continued to weaken PERS – the unfunded pension amount increased, from $16.8 billion to $16.9 billion, the annual payout to retirees increased by $131.5 million, the number of retirees jumped up 2,713, and the number of active employees fell 1,695.

PERS now covers 104,973 retirees, up 28,830 over ten years. There are 150,687 active employees in PERS, down 16,435 over ten years. This trend of more retirees but fewer active employees is the fundamental flaw undermining PERS finances.

This flaw was exacerbated this past year when, for the first time ever, total payrolls covered by PERS fell.

Why is that not good?

PERS is funded by employer and employee contributions along with investment returns. These contributions are percentages of payroll, 15.75% for employers and 9% for employees. One of the actuary assumptions used to compute the funding ratio is that payrolls will grow every year, so total contributions will grow too. When that doesn't happen, it throws off the actuary's projection. When you add flat to negative payrolls to the negative trends above, the flaws in PERS funding become fatal, unless new money is found.

So, how did the funding ratio go up if these trends are in place?

As your pocketbook will soon show you, lots of new money was found.

Starting next July, PERS will increase the employer contribution rate from 15.75% to 17.4%. This higher rate times total payrolls will up annual contributions by nearly $100 million. Over the 30-year horizon actuaries use to calculate the funded ratio, this adds nearly $3 billion to projected revenues in today's dollars.

That's a lot of new money.

Where will it come from?

Well, public schools' share of PERS payrolls is 37.5%, state agencies' 17.5%, universities' 16.2%, municipalities' 9.8%, counties', 8.2%, community colleges' 4.9%, and other public entities' 5.9%.

If the legislature only squeezes the increased $18 million for state agencies into its already stretched budget, the remaining $82 million will be passed on to you, the taxpayer, in the form of increased school and property taxes, increased tuition and fees, or fewer teachers and reduced basic services.

If the legislature, which put PERS into this terrible financial bind to begin with, chooses to cover more of the cost, where will it get the money?

You know.

Here are some scattered estimates of the yearly impact from higher employer contribution rates based on audit reports: among school districts, DeSoto County $2.5 million, Jackson $2.4 million, and Rankin County $1.6 million; among community colleges, Hinds $880,000, Northwest $507,000, Itawamba $405,000, Meridian $262,000, and Mississippi Delta $209,000; among municipalities Tupelo $341,000, Meridian $325,000, and Greenwood $181,000; among counties, Madison $270,000 and Lowndes $183,000.

Talk about unfunded state mandates forced on local governments!

Yep, PERS sees taxpayers as their evergreen money tree…and the legislature lets them.

Crawford is a syndicate columnist from Meridian.


Anonymous said...

Instead of an article based on opinion, possibilities and conjecture, I wish Mr. Crawford had told us more about increased school and property taxes, increased tuition and fees, or fewer teachers and reduced basic services.

When was the last time your county property taxes went up? Does he really think periodic tuition and fees going up is a reflection of demands on 'employer contributions'? Or, in reality, does he really know that periodic school taxes are increased (rarely) to fund building projects, increases in busing costs and campus buildouts (to get rid of trailers)?

Agencies, unlike schools and municipalities, are funded annually. They can piss away those funds on new desks and curtains and computers and hiring or they can divert part of the budget to PERS contributions. The funding is what it is. It's nonsense to suggest taxpayers are being shafted by PERS.

But, I believe the bottom line here is the 'almost unmentioned' reality that there are fewer and fewer contributors to the system, something that was crucial in the formula...but now takes a whuppin' every year.

We all seem to want the same level of service with fewer employees, low wages and zero raises. Then, at retirement, let them eat cake.

Anonymous said...

Wonder if Shad White would be interested in agency minutes over the last 10 years? Many a board minutes will (or won't because they were changed) show that high level officers were selectively placed in plum positions to increase their last few years of salary to increase their four years that applies to PERS. It goes on year in, and year out, but no one has the cojones to investigate what those outgoing salaries were, and how on earth they were justified. Ya think any quid pro quo was happening with any local projects possible as well? (Naming of streets/buildings, etc.) You betcha'. But will the minutes reflect it? Nope. Get to it Shadrack, in case you're wondering just why they're were so many recent "additions" to the PERS roles.

Ben Dover said...

Suck it up snowflakes. I got mine. Cha ching.

Anonymous said...

I don't know about your theory, 9:23, but for at least 50 years agencies have promoted people into higher paying positions for various reasons. Sometimes it was because of PERS and sometimes it was because of the 'other P', poontang. And often it was both. There's no law or rule against it. Just part of the landscape. Many agencies have been virtual whore-houses forever.

Our governor just gave Miz Hyde-Smith an undeserved promotion which, while not PERS, will eventually entitle her to a federal pension. And Phil will get a nice PERS retirement himself.

Anonymous said...

What 8:52 am calls " opinion, possibilities and conjectures", I call rational inferences to drawn from facts.

8:52 is correct, of course, that PERS doesn't exist in a vacuum, but Mr. Crawford is writing a short piece , not a book.

And, it's true that the original formulas assumed that " the employer" would use the same basic sets of principles in place when PERS was created and that the SEC would have been able to still have enough oversight authority to prevent stock investment from being little better than gambling.

In the present climate, a good basic change to start would be for all " employers"( aka state and local government) to use zero based budgeting and to team in defined sectors to use economies of scale in purchasing.a

We can't however , force them to bother to do their jobs and research the durability and cost effectiveness of what they purchase.

The problem is that few who vote or serve in office know what zero based budgets or economies of scale are or that quality sometimes quickly pays for itself.

Anonymous said...

Privitize the benefit by rolling PERS congributions into Deferred Comp/401k and lay off every incompetent PERS employee. The fees and contributions that state employees pay can go to a competent retirement investment broker. What a joke of an agency.

Anonymous said...

Shut. It. Down. I’m tired of throwing good money after bad...

Anonymous said...

OK all you armchair experts. I put in 30 years to secure my pension. Nobody gave me a damn thing. I played by the rules so I could enjoy retirement. Bottom line, Leave my retirement alone and go make your own!

Anonymous said...

2:00 - Tell us about your throwing good money after bad. And also let us know how you'd shitcan a retirement system that is contractual by law and has been for decades. Shut it down? You work down to the hardware store, right?

Anonymous said...

After 10 years I left my state of MS job. I had contributed a little over $20,000 into the system over those 10 years. At 60, personnel called me to sign up for retirement. I could not believe that I actually qualified and get over $500 a month for a $20,000 investment....for the rest of my life, and my wife's life. That is $6000 per year on a $20,000 contributed investment....For life. No wonder PERS is broke.

intelligent_guy said...

If you care anything at all about the looming pension crisis (and you should), and you haven't watched the following - you need to:

Kentucky (featured in the Frontline doc) is worse off than MS, but MS is heading in the same direction unless changes are made.

Anonymous said...

The answer to this problem seems abundantly clear to me: simply hire more state and local employees.

While I'm handing out free advice, and since MS is getting the lottery, here's another tip: you should always play the lottery when the jackpot is small, because fewer people play, and you have a better chance of winning.

Anonymous said...

If PERS were a private entity, it would be governed by ERISA.

ERISA would have thrown out the trustees and PERS management when it went under the required 80%.

Anonymous said...

No 5:30, I don’t work at a hardware store, I actually sign the front of paychecks, not the back of them. I own several businesses and provide a very substantial retirement benefit to my employees which rewards personal responsibility and sound decision making. I am very transparent with my employees about the health of our companies and they share in the profits when things are good, and are well-informed when things get lean. I also provide financial literacy courses for my folks and look after them as if they were family.

Where the government fails is when an employee is hired, they don’t take the time to explain how money works and how small contributions over several years compound and can have an amazing impact on their retirement; rather, they sit them down with mal informed advisors who don’t really know what they’re doing.

Cynical Sam said...

As long as democraps keep throwing money the this bottomless pit, the democrap recipient$ will keep re-electing them.

Anonymous said...

PERS is not an agency. The yokels who are yelling 'shut down that agency' are uniformed. Being uninformed means being ignorant.

ERISA does not cover state and federal government employee welfare or benefit plans. Nor can PERS be privatized. Get over it.

PERS has forever offered seminars to covered employees, 5:33. But congratulations for being so smug. You're not the only game in town that provides retirement plans and they all require annual employee meetings in the 401(k) arena so you're really NOT special.

Anonymous said...

I rolled my money out of PERS and into my 403(b) just this year. I had no desire to leave it in PERS, as I expect that the legislature will change the rules\formula for retirement at some point before I could start drawing.

As far as payrolls being flat, it is not surprising to hear. State government employment simply isn't growing and starting salaries for state positions under PERS purview have been flat for years. For example, the starting salary for an Audit I is the same today as it was in 2007. 11 years and not even a slight increase to the starting salaries being offered to new employees.

Anonymous said...

The so-called "prudent" level of 80% funding does not exist. I challenge anyone to find a government regulation or actuary requirement, with a link to the citation, that requires 80% funding in a government pension.

Oh, and if the legislature had not handed corporations over $500 million a year in tax breaks, the state budget wouldn't be so stretched.

Anonymous said...

8:40: I have worked for the state for some 24 1/2 years. For the present employees and those that have retired, neither the Legislature nor PERS can change the benefits they have now. The State of Mississippi is under a legal contract with both present employees and those that have retired. What the Legislature can do is change the 13th check for future employees. Just ask Nancy Collins about the bill she introduced in the senate and now we have Rep. Jeff Smith making noise about changing the 13th. check. Jeff, the last time I checked, you have a lot of state workers in your district - MUW, EMCC, teachers and MDOT employees - not to mention their families!

Anonymous said...

8:40 - You're right. Look at our salaries for police officers, prison guards, first year teachers, D.O.T. employees, auditors. Some state employees in the highly educated professional ranks speak of themselves as 'performing a public service' and 'willing to sacrifice'.

Then we've got idiots out there like the poster at 7:30 who thinks this is a partisan political problem, yet nothing has changed in the past almost 20 years of republican control.

In my last private sector job wages for ALL employees, top to bottom, were frozen for a year and a half. With state employees in Mississippi, that seems to have been the case for ten years or more for typical across-the-board employees in all ranks and classes.

Anonymous said...

... almost 20 years of republican control.

Show us where the Legislature has been in control of Republicans for "almost 20 years". PUT UP.

Anonymous said...

Republican governors since 1992 except for 2000-2004
Republican lieutenant governors since 2002
Republican speaker of the house since 2012

Anonymous said...

9:52 "last time I checked, you have a lot of state workers in your district..."

May be 2 percent? ...but the 98 percent of NON-government workers really want this addressed.

Anonymous said...

Therefore the claim is bogus.

Anonymous said...

When did Fordyce take office? That, my friends, is when the 'republican control' ball started rolling. Read it and weep. But, the actual date matters not. It's not partisan. No legislature or governor has ever been willing to touch it, except to increase their own benefits.

Anonymous said...

Casinos will fix all our budget problems. I mean sports betting will fix all our budget problems. I meant to say the lottery will fix all our budget problems. Wait, I meant legalizing pot will solve all our budget issues....

Rinse. Repeat.

Anonymous said...

I fully understand that ERISA does not apply to the state government. It is, however, a benchmark set by congress to root out corruption and non-funding by private companies.

Why can't we come anyway near the benchmark.

How much are we paying the consultants to achieve a 9% return when the first year of Trump returned 20%?

Anonymous said...

...but the 98 percent of NON-government workers really want this addressed. October 29, 2018 at 11:29 AM

Please publish your survey. Mine shows that 94% of all residents in Mississippi have never heard of PERS unless they have a family member covered by the system. And in 44% of those cases, that individual is working two jobs.

Anonymous said...

ERISA does not set a funding benchmark.

And investment managers got .0035% in fees relative to plan assets. That would be like paying $350 per year to actively manage $100,000.

pages 31 and 32

Anonymous said...

12:50 Link?

Anonymous said...

The last time I was staying at the Battle House Hotel in Mobile AL, I read that the hotel was owned by the AL State Retirement System as a investment, and it was not the only hotel the retirement system owned. Seems like the State of AL has people people employed who know how to make money for the retirees and MS has people employed who were connected and needed a job... The way that most of the State of MS Government is...

Anonymous said...

As was stated earlier in this thread, Mississippi is just one big whorehouse -only the faces and names change every election cycle - but they're incestuous and repeat in other positions protected and saved for them. Mississippi - born and inbred.

Anonymous said...

I'm 12:50 and I HAVE no link. That's the point of my post. Neither does the idiot I was addressing. You should really be more alert.

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