Hearing “record surplus” or “best financial shape in history” followed up with proposals for new “tax cuts” from Gov. Tate Reeves, challenger Brandon Presley, and other campaigning politicians? Take those boasts with a massive grain of salt.
Here’s why. All those politicians intentionally ignore a huge and growing financial deficit.
When Gov. Tate Reeves took office in 2020, balances in the state’s capital expense fund and working cash stabilization fund plus excess general fund tax collections totaled under $1 billion. By early 2023 that total increased to around $4 billion. Thus the politicians’ proclamations.
However, during that same period a major liability steadily increased by about a similar amount – $3 billion. Had that liability just been funded enough to keep it level, there would be no “record surplus.”
Of course, the story is much more complex than that. For example, part of the surplus resulted from underfunding government agencies and programs – none more onerous than the Mississippi Department of Health. On the other hand, the surplus would have been greater had the Legislature funded recent projects as usual with bonds rather than cash.
So, what is that major liability? The PERS deficit.
When Gov. Haley Barbour created his PERS Study Commission in 2011, the deficit was just over $12 billion. It hit $20 billion in 2022. That means the deficit averaged an increase of about $725 million a year over the past 11 years. Those increases occurred despite the PERS Board increasing employer contributions multiple times.
The PERS Board recently proposed to bump up employer contributions again, this time to 22.4% of payrolls. That would generate about $345 million in new revenue annually. Also, Mississippi Today reported the PERS Board may finally be looking to implement some changes to future benefits.
However, neither the proposed contribution increase nor the reported benefit changes would reduce the huge and growing deficit any time in the near future, nor stop the ever increasing costs pushed out to local governments.
With so much cash in hand, Reeves and other state leaders (or Presley if he gets elected governor) have no excuse to let this financial sore continue to hemorrhage. Forget income, grocery, and other tax cuts. Commit the billions needed to stabilize PERS. Then fix the plan by reworking current and future benefits, including the COLA. Nothing less will work. (Note: The revealed changes being considered by the PERS Board look to have far less impact than the Barbour commission recommendations.)
This reality perspective of the state’s financial situation will likely be missing from campaign speeches. But boasts about “record surpluses” and “best financial shape” should be recognized for the hyperbole they are.
“I, wisdom, dwell together with prudence” – Proverbs 8:12.
Crawford is a syndicated columnist from Jackson.
18 comments:
What do you mean by 'reworking current benefits'? Have the balls to say it.
If the budget surplus is used to 'shore up' the fucked up retirement program, better hold back enough cash to pay a cadre of lawyers to respond to the problems created by any proposal to 'rework current benefits'.
The legislature would have more egg on its face than with the creation of the unnamed, unelected courts with no right of redress.
The board would do well by replacing the overpaid advisors and parking the money in index funds. How much is 50,000,000/yr worth over the next 20 years? Probably quite a bit.
Unavoidable.... https://www.youtube.com/watch?v=NaArxPRaCLc
So so true! And complicating the equation is the boast that the number of state employees has been reduced. But what of the ever increasing number of contracts let to hire non-state employees and in many cases retired state employees to do the work that state employees formerly performed! So the contract cost increase while Pers donations by state employees decrease. Increased hidden state cost while Pers goes further in the hole. So watch what current politicians tell you and ask questions.
State employees are a minority of PERS.
Shares of employee population (2022 proportion) (2012 population) (2012 proportion)
State agencies: 24,66 (17%) (32,618) (20%)
IHL: 16,744 (11%) (11%)
Public Schools: 60,787 (42%) ( 64,252) (40%)
Jucos: 5,761 (4%) (4%)
Counties: 14,483 (10%) (9%)
Cities: 15,404 (11%) (11%)
Total Employee Population: 144,416 (2012 Population: 161,744)
11:15
Keep in mind that the push to hire private sector people to replace government employees is from elected officials trying to repay favors to donors.
There are PERS restrictions on hiring retired employees. If a retired person is hired, they can earn up to 25% of their average compensation used to calculate benefits without affecting their benefits. If a retiree is hired, the employer is required to make the employer contribution to PERS on the amount paid to the retiree.
If a retiree earns more than 25% of their average compensation used to calculate benefits, their benefits are terminated and they become an employee again.
https://www.pers.ms.gov/Content/Documents/Regulations/Reg34.pdf
Regarding those PERS restrictions on re-hiring retired employees, I don't think any of that applies if the individual is hired as a contract worker or is employed by a company which is hired by the agency. In those cases, the person is not an employee of the agency so the PERS restrictions do not apply.
As usual, Crawford's column was written with the sole purpose to impugn Reeves, directly or indirectly.
Only statewide candidate openly and frequently touting their record for reducing the ranks of state employees is Democrat Delbert Hosemann. Reducing the number of state employees only exacerbates the absolute disaster PERS faces with its nearly upside down active employee:retiree ratio. Kingfish has pointed out this fact many, many times over the years.
The true enemy that PERS participants should be worried about is Democrat Delbert Hosemann.
Compare the size of our general fund in 2023 to the size of our general fund when Bryant and Reeves came in 12 years ago. You will throw up in your mouth a little.
Someone please dial up Bernie Madoff and ask him how he thinks we can fix this clusterduck!
Many are quick to speak highly of the Haley Barbour plan to address PERS. Haley did this, Haley said that, Haley's idea would have worked.
However, Barbour was also the first to come up with the idea of removing certain agencies from under State Personnel Board control on a limited time frame.
For example, as most of you know, Barbour came up with the plan (it's still popular and dangerous) to grant Agency X to set aside traditional SPB rules and fire and hire at will during, say, this year or that year.
Sounds great, right? But all it resulted in back then or now is reducing the number of long-time employees of whom directors were not fond, hiring cronies and bringing in contract work (eliminating the number of PERS contributors).
Haley was no genius. He was a boastful bully with an Ole Miss Frat persona.
@11:12 Precisely. I'm no finance expert, but aren't there 7 or 8 large financial firms advising PERS? I know diversity of investment is key to surviving tough times like 2008 and 2020 etc but at what point do you have say "the entire market(s) is (are) diverse enough; no need to hire several large investment firms when two or three will suffice." Further, KF, since teachers make up a plurality of contributors, will the pay raises passed in the 2022 session positively affect PERS contributions? Just a thought
They do? Probably a third to 45% of that number is non teachers. However, the salary increases should increase employee contributions a little.
12:41
12:03 here.
You are getting confused between a contract worker and an independent contractor. A contract worker is for all purposes an employee that is paid through a contract. The employer still directs and supervises the work. This is what I was talking about in the 12:03 post and those limits apply to contract workers.
An independent contractor works independently from the employer. The independent contractor decides when to work, how long to work (subject to contract limits), how the work will be done, and creates the final work product to send to the employer. The employer does not direct or supervise the work. Independent contractors have to be approved by PERS and it is not a rubber-stamp process.
For retirees employed by a company which is hired by the agency, section 110 of the link I sent says in part: "The limitations on reemployment while in receipt of a retirement allowance may not be
circumvented by contracting to perform services through a third party (i.e., a placement or temporary employment agency)."
In other words, the same limits apply as the ones applied to contract workers, i.e. can't earn more than 25% of average compensation used to determine benefits.
They spend $100M a year in fees to money managers who can't outperform the SP500 in either direction. Pretty simple first step is to fire those guys and automate the investment portion using an extremely frictionless Vanguard (or similar) account. This could probably be done at 2 one hundredths of a percent or less for an account this large.
Study any 10 year period of PERS vs the SP500 or even just the Total Market. Then realize while losing that game they also gave away nearly $1B in fees to these folks to underperform on these investments.
All of this has been mentioned in depth in previous PERS related blog posts here by TwoSmartGuys.
9:46 - Notwithstanding IRS definitions, there are hundreds, maybe thousands of Mississippi employers using contract workers and classifying them as independent contractors with NO regard to legal definitions. And they've done it for decades.
If the IRS were to sweep through this state, these agencies as well as private sector employers all over the state would have sphincter issues. You know that, I know that, show me someone who does NOT know that.
Kingfish says: "However, the salary increases should increase employee contributions a little."
A little or a lot, matters not. Surely you know that both the employee and the employer contribution is based on the employee's pay.
"Independent contractors have to be approved by PERS and it is not a rubber-stamp process."
Who in the world told you that?
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