Tuesday, April 2, 2024

Bigger Pie Forum: What we Learned at PERS Board Hearing

Last week, the Senate Government Structure committee held a public hearing on House Bill 1590 which aligns Mississippi’s retirement board structure with national models and prevents the rate hike approved by the current board to increase by hundreds of millions of dollars what taxpayers contribute to the plan known as PERS (Public Employees’ Retirement System).

There were no fights or heated exchanges – just an open dialogue about PERS governance and how members view their roles, as well as opening comments from the current president of the Mississippi Municipal League, Hattiesburg Mayor Toby Barker.

Representing 290 member cities, towns, and villages, Mayor Barker told the committee that his organization is significantly represented in PERS (at 30 percent of total employers) and feels a “responsibility to voice concern when we see an unsustainable trend of shifting the burden of paying for PERS to employers, particularly cities, towns, counties, and school districts.” Mayor Barker said that it’s “no secret the unfunded liability in PERS is a problem, and it’s a storm that’s been brewing for some time.”

He explained that the current PERS Board recently voted to phase in a five-point increase in what cities, towns, and villages pay to fund the system – an effective increase of 28 percent in retirement costs on local budgets. “My encouragement first is to please call your mayor, your county supervisor, or school superintendent” to ask both how much it will cost to pay for the PERS Board rate hike and how they’ll pay for it.

Mayor Barker offered a few scenarios: “Raising property taxes? Yes, and probably multiple times. Cutting services and employees? Absolutely. Raises for city and state employees, including first responders at the local level? Doubtful at best.”

One of the critiques of the current PERS Board member structure is the lack of taxpayer representation. The current board is made up of ten members, with just two members accountable to taxpayers. How does this impact the governing mindset of the board? Here’s what PERS Board members told the Senate Government Structure committee.

Jay Smith was the first PERS Board member to speak. He’s the K-12 and community college representative on the board and works as superintendent of the North Pike School District.

Smith told committee members he considered a series of questions before casting a vote as a pension board member: Will his vote positively impact the employees who elected him to the board? Will his vote positively impact current employees when they get to retirement age? Will his vote positively impact future government employees, like those who will become teachers? Then, Smith “casts my vote accordingly.”

Smith told the committee he does not consider costs to his school district (an estimated annual cost of $750,000) nor did he mention consideration of the impact on taxpayers. “My role and responsibility as a board member is to try to ensure that the funding is in place for the plan. My role as a superintendent in trying to find the [money for North Pike] is a different entity in and of itself. I don’t sit there again as a superintendent; I sit there trying to make the best decision that I can make for those individuals who are receiving benefits and those who will be receiving benefits in the future.”

Smith was pushed further about paying for the estimated three-quarters of $1 million rate hike for North Pike that he and fellow PERS board members approved. He told the committee trying to pay for this is a “difficult question to answer” and that his options include shifting funds, reducing maintenance and administrative budgets, not replacing teachers who leave, and “looking at personnel” and other ways to “eat your money.” Smith reiterated that he’s “not playing the role of superintendent, I’m playing the role of PERS board member.”

Current PERS Board chair and long-time Tupelo city clerk and CFO Kim Hanna spoke next, echoing much of Smith’s comments. She told the committee she knew how it feels “to take some of the decisions back home” but that it doesn’t “deter my decisions. We have a sworn duty, we all do, as fiduciaries to make the best decision for the plan, for the members.”

In explaining her outlook on pensions, Hanna said she is “passionate about PERS. I’m a third generation PERS member; it’s very important to me…But at the same time, I have to take that city clerk and CFO hat off when I’m at the PERS board meetings and make those difficult decisions,” like the $1 million rate hike on the City of Tupelo she voted to approve as a PERS board member.

In summary, these board members consider only plan beneficiaries when making decisions, a concept explored further by Government Structure chair Chris Johnson. He described the current PERS board as having eight beneficiary representatives who voted together “virtually 100% of the time” in the interest of members, not taxpayers.

Chairman Johnson asked Hanna if she would support legislation that added five new members to the board to provide additional perspective to “look for options that can both protect retirees and be cognizant of the effects in other areas of state government?”

Hanna said she would “not be opposed to that that at all.” She said she’s been on the board since 2018 and is constantly learning new things, adding that “any additional information is always helpful.”

The Senate hearing on HB 1590 served an important role in shining a light on issues facing the PERS system, notably the structural challenges within the current board makeup. Asking Mississippi taxpayers to cover skyrocketing costs for a retirement system that benefits just one out of every seven Mississippians isn’t fair – and it’s not the only option.

In my humble opinion as an elected official and PERS participant, “fiduciary duty” also applies to the financial health and sustainability of the PERS system itself. Infusing the PERS conversation with new voices and ideas can only help, not harm, the system’s long-term outlook.

Passage of HB 1590 can positively impact the PERS system and reduce pressures on local budgets – without impacting retiree benefits. Organizations like the Mississippi Municipal League, Mississippi Association of Supervisors, and Mississippi Association of Realtors have issued letters of support for HB 1590 and urge the Senate to take swift action.

Mayor Barker told the committee that, on the issue of PERS, the “status quo is not an actual or viable long-term strategy.” Mayor Barker is correct. As of June 30, 2023, the unfunded liability of PERS was $25.54 billion, exceeding by $10 billion all of the State’s debt and the debt of all its municipalities as well.

Addressing the governance issue as HB1590 does, is an important first step in stabilizing PERS and the State’s finances.

Call for action: Hopefully the members of the Senate committee will move forward and bring HB 1590 to the Floor of the Senate for consideration.

Ashby Foote of Bigger Pie Forum penned this post.  Bigger Pie Forum sponsored this post. 


Anonymous said...

In my 401k and Roth IRA, I have investment control (I choose the experts, etc.). The bill replaces the beneficiaries having control and influence, and gives it to the Governor. I'm against that.

The legislature is just trying to find a way to change PERS in a non-election year. But they are not trying to change plans, options, or finding additional funding for the benefits given and promised to it's employees.

The final opinion in the article, "an important first step in stabilizing PERS." How? It's wrestling control and giving it to someone to hastily make appointments in the first year of office.

Why not give the auditor power to claw back money from Dean Scott and his fabricated time sheets. He's going to take home 20k plus COLA every year he didn't properly earn. Every bit helps when they the average payee gets $20-30k.

Anonymous said...

PERS is earned pay for public employees who generally are paid less than private comparators. It should be funded, and taxpayers benefit from the work public employees do. Many public employees took these lower paying jobs in government in reliance on the retirement plan. Not funding PERS is like a breach of the employment contract. So, the fair question is how to fund it properly in accordance with promises made to our employees.

Anonymous said...

The bigger pie clan is seeing their pet bill die. But nothing new here except singing to the anti-PERS choir.

Anonymous said...

Talk about foxes guarding the hen house--

Anonymous said...

@April 2, 2024 at 10:10 AM, PERS is "earned" compensation, but employees implicitly accepted a deal that current taxpayers and instead of having funded benefits, essentially extended credit to their employer and/or the state that they would be able to get future taxpayers to pay for a PERS benefit package that current taxpayers would be unwilling to pay for.

This has turned out to be a great bet for most PERS participants. It's a riskier bet for current PERS participants and young retirees. And it's an absolutely shitty deal for current employees because current contribution rates probably are high enough that they are close to enough to fund their future benefits, but instead those increased contributions are going to current retirees and leaving their future benefits unfunded.

Legally, PERS participants are still in a pretty good position. There is no state bankruptcy code; there is the contracts clause which, while not really aimed at solvency issues, makes it hard if not impossible for states to give haircuts to pensioners. But at the end of the day, it's going to be a political question of how much the state government can confiscate from current property owners and residents to pay for benefits that should have been funded long ago. PERS participants are in a better position than taxpayers, but neither are in enviable positions.

Anonymous said...

I know Mayor Barker is talking about his concern for the increase to Joe taxpayer in his city by increasing the employer contribution rate.

I wonder how he and others will explain the increase in taxes at the county and municipal level when we eliminate the state income tax or grocery tax! Or another option is to just layoff policeman, fireman, and city/county workers.....but one or the other will take place.

Now, I am all for eliminating the state income tax or any tax for that matter...but do not be fooled or mislead into thinking this is going to save you any money.

Anonymous said...

Cutting benefits is no more than not paying employees the contracted amounts for work performed. PERS is delayed compensation previously agreed to by the employee and employer. Politicians love it because the make employees happy while not actually having to pay for it, at least for now. The legislature gave pay raises in the form of delayed compensation, so they should stand by their agreement and not default on their obligations.

Anonymous said...

11:15 Take a look at the Supreme Court decision in Sveen v. Melin, 138 S.Ct. 1815 (2018). It reaches the exact opposite conclusion about the contracts clause in the U.S. Constitution that the Mississippi Supreme Court reached in Porter v. PERS.

Anonymous said...

PERS still giving out that 13th check? If so how much is it and why?

Anonymous said...

Thank goodness I’m already a PERS retiree and don’t have to pay state income taxes to help fund PERS.

Anonymous said...

They need better managers. The current ones are making tons of commissions and fees and while farting around with everyone’s money. It’s sad that any random fool could have simply put the same money in the S&P and had higher return rates!

Anonymous said...

@1:17PM... Ignorance abounds around the 13th check, but the problem isn't the 13th check at all - it's the % used to calculate it.
When someone retires from the state system this year, they are paid based on their current salary * (percentage based on years of service). Let's say that is $2000 a month in 2025 and that retiree will always make $2000 a month as their base retirement income.

They are allowed a cost-of-living allowance (COLA) and they can take that as an increase in their monthly amount or elect for a "13th check" that is just the COLA. The same person might get a 13th check for $720 after a year or they could spread that amount over every month.

If the COLA was based on actual inflation, I don't think any reasonable person could be upset. The problem is that it is pegged at 3% per year and not tied to inflation. I guess that is good for the state when inflation is high, but historically that is a very high COLA.

So if someone retired in 2000 making that $2000 per month, their 13th check is almost $25,000! If they had followed actual inflation, it would still be $19.5k or so.

Anonymous said...

My take away from watching the senate hearing is that the pers retirees could care less about the taxpayer(non-pers) who fund 2/3rds of the fund. Also Senator Sparks questioned the board member who I believe a superintendent at North Pike what his plan was and he said “he didn’t have one” and when pressed he said he d have to fire teachers and increase taxes . Doing nothing = failure .

Anonymous said...

That so called “13th check” is the same as a cost of living adjustment that social security recipients receive. Retirees don’t get a “raise” in their base pay after they retire. Retirees also have a choice to take it monthly, in the same manner social security recipients receive their raise. Some call it 13th check, many call it COLA. But 13th check is so much easier to gripe about.

Anonymous said...

So, who does the Governor want to manage the fund; Butler Snow?

(Follow the money)

Anonymous said...

It’s really not a cola , it is 3% that compounds every year .

Anonymous said...

1:21 p.m. "Thank goodness I’m already a PERS retiree and don’t have to pay state income taxes to help fund PERS."

Awesome! However, Mississippi exempts all forms of retirement income from taxation, including Social Security benefits, income from an IRA, income from a 401(k) and any pension income.

So, really you are not any different from any private retiree in Mississippi. Now, as we phase out the state income tax, all retirees or retirement income could take a hit, as there is a real possibility of an increase in property taxes.

I think maybe you were just trying to BS some of us.

Anonymous said...

13th check is an annual accumulation of the past years cost of living adjustment (COLA)It’s really unwise to accept the COLA in December at year end when you could receive it monthly beginning at first of year in January and each month thereafter.

Anonymous said...


So, the folks who mandated this radical increase in benefits (which probably, more than anything else, caused the situation PERS is now in) are going to be in charge, because the present Board of Trustees can only do that which the Legislature allows by law?

Anonymous said...

This one one of the most non sensical articles ever to appear on THIS BLOG. It has been acknowledged that under the leadership of the PERS board[ yes , acknowledged by legislative leadership ] that the investments returns are in the upper tier of returns among similar retirement funds AND that fees paid are in the lower tier of similar retirement funds. Here is what it boilS down to: the Ms. Legislature HAS ALL THE AUTHORITY to modify PERS in whatever way it deems fit, PERIOD. Changing the board will have ZERO effect on the outlook of the fund. The only thing that will have any effect is a change to benefits which legislators have EMPHATICALLY stated they do not want to do. HOWEVER, they are the only ones who can change the system with or without the PERS Board. This is all just political posturing and theater . Just the facts.

Anonymous said...

2:00 Please tell me you realize that PERS has a responsibility to invest in low risk funds ? PERS investment track record for retirement funds is exemplary.

Don Drane said...

Is that the same Mr. Foote who totally abdicates his responsibilities as a Jackson City Council-Person....or is there another rounder by that same name?

Seems rather than a majority of board members being elected by various legions of participants, people who have actual skin in the game, Mr. Foote prefers to have five on the board at the behest of Tater and three on the board at the behest of Delbort.

Note...I made no mistake is my numbers. The governor will appoint FOUR and he has already appointed the Tax Commissioner who is an automatic Board member. That's a total of eight out of eleven between Tater and Dagbart, all beholden to the person who appointed them.

It all boils down to who Tater wants to see get the money-management and advisory contracts.

Dingbert can kiss the governership goodbye. But watch him try the 'Who, Me?' defense.

Anonymous said...

Well, that was quick. I watched the Committee hearing online, and it was over in about 10 minutes. The Chair muttered a few words about PERS having enough money to pay retirees, but not acknowledging that they have less than 100% of what is needed for retirees and 0% of what would be needed to pay the pensions of current employees. He said they had heard from "thousands" of PERS members. He encouraged the PERS Board to ask the Legislature for a separate appropriation and cancel the 2% increase in rates. He also said that perhaps they could look at "maybe adding a new Tier", as if that would solve the unfunded liabilities. He also mouthed a few words about paying our commitments. And with that, they took no action on HB 1590.

Anonymous said...

Bigger Pie obviously misrepresented or misunderstood Toby Baker.....everyone in Hattiesburg knows Toby has never seen a tax that he didn't love. He is full of excuses but we still pay 10% tax at McDonalds.

Anonymous said...

PERS beneficiaries, the board (yes, that is redundant, but.) claim that you can't change the benefits for existing employees. That's based on what; maybe the opinion of a former AG (also a beneficiary!) Over the years, benefits have been added-- i.e the 3% guaranteed COLA, compounded, something no other benefit play would ever consider. Or the 'lets pay on the high four rather than the average over time, a benefit not for the masses of the participants but only for the few that can gain a one-term appointment somewhere to convert their $30-40kk to a $120k benefit plan - among others.

I don't but their legal standing, but just for those that want to buy into that bulls**t, the legislature can always change the tax laws applicable to any income. Let's tax that 3% compounded COLA, commonly known as the 13th check for most, at a rate like high income individuals were taxed on the federal level a few decades ago -- maybe at an 85% rate or so for a few years. Take some of those six digit thirteenth checks down to a reasonable cost-of-living adjustment - maybe comparable to what us commoners that draw Social Security based on our private sector employment and contributions over the past several decades (not retiring after 25 years; not this guaranteed COLA, forgetting the compounding of the rate; based on thirty five year career earnings averaged rather than one four year ananomly.)

Give me a break on these 'low-paying government jobs'; ignoring the favorable health plan benefits, the annual leave, medical leave, the piling it on at retirement, and now of course something the private sector never heard of - comp time.

And then the absolute requirement that the people that control the process are doing nothing but representing themselves and their compadrees - those that want nothing more than to ensure that any decisions are only those that ride in the wagon and not giving a damn about the folks that are pulling the wagon.

Thank you Delbert for the display of "leadership" on this issue; we all know your only answer to this political dilemna is to pump billions of tax dollars into the system so that you can claim the problem is solved - while just like the elected board, forgetting who's pocket those billions are coming from.

Anonymous said...

3:33pm well said. Why would legislators vote for a bill that doesn't benefit them despite future generations suffering at their selfish expense. You only live once screw the future employees!

Anonymous said...

State government is a disaster. If you haven’t figured it out yet, it’s only about making sure all the dead weight gets your money. Every agency has started doing everything possible to get more revenue. Here are some examples: MHP aggressively targeting innocent citizens with roadblocks that violate the 4th amendment, PRV/MDWFP destroying historical wildlife habitat on public land for commercial development, and MDOR aggressively applying sales tax on used vehicle purchases. Rather than trim any of the fat or have a normal retirement plan that requires saving and living within your means, these parasitic commissars are going after you. As far as they are concerned you should just shut up and go to work so that you can pay their fat @$$es to sit around and do nothing but suck the lifeblood out of society. PERS should be shutdown, they should get a defined contribution plan and if they don’t like it, they should go get a real job. It’s not a damn prison! Ask yourself, are you getting a “13th check” that grows with inflation every year? Well they shouldn’t either!!!

Anonymous said...

State of Mississippi is the lowest in USA paying state salary. Get the money from the lottery. This is a crying shame.

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