Years of kicking the can down the road has caused a mess over at PERS. The Board of Trustees voted to increase employer contribution rates 5%. The legislature throws tantrums without offering solutions. Governor Haley Barbour created a study commission in 2011. The Commission issued a report and several recommendations on reforming PERS. Many of the capitol clowns were not in office when the report was issued so JJ's December 15, 2011 story and the Commission's report are posted below.
Governor Barbour and Gulfport Mayor George Schloegel announced the recommendations of the PERS Study Commission yesterday at a press conference.* Governor Barbour said:
Mississippi has a retirement plan that is underfunded by more than $12 billion – a figure that has only worsened over the past decade despite hikes in taxpayer and employee contributions," said Gov. Haley Barbour, who created the commission in August to study Mississippi's state retirement system and recommend reforms to strengthen the plan. "In 2001, PERS had a funded status of 88 percent of assets needed to fund its liabilities; today, that level has dropped to 62 percent, far below the level recognized for such plans. Taxpayers are putting in about 50 percent more than they once were, but the system continues to fall farther behind. We must reverse this trend to protect our retirees and taxpayers future.The commission made the following recommendations:
*The PERS Board should reconsider lowering its investment return assumption from 8 percent to 7.5 percent as recommended by PERS' own actuary, Cavanaugh MacDonald. Over the last ten years, PERS has achieved a 5.41 percent investment return (p.16). Many states are lowering their investment return assumptions to more accurately reflect market conditions.
*PERS and the Legislature should study adding a defined contribution component. The Governor stressed it was a component, not a replacement of a defined benefit system with a defined contribution system.
*The Legislature should consider revising the make-up of the PERS Board to include more financial subject matter experts and include non-participant taxpayer members. The PERS Board of Trustee only has two members with financial planning expertise, and one of them is about to become Lieutenant Governor although there are some CPA's on the board. (KF 2024 note: The Democrats screamed this was selling out to Wall Street. Yup, heaven forbid a non-voting board member should actually have real financial expertise.)
*Change the date of retirement age with several tiers: 62 if fully vested, 55 with at least 30 years of service but no COLA until age 62, or receive a reduced benefit before age 55 if a minimum of 30 years employment is completed. The commission estimates these changes would improve the funding status to only 64%, save $92.8 million, and reduce the employer contribution by 1.62%.
*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.
Here is an interview with Senator Hob Bryan. The Senator from East Mississippi says there is nothing to see here, move along. Actually what he said was there was no point in studying PERS for another five years and that the assumptions were just that: assumptions that should not be taken that seriously. I asked him two questions at the end of the clip. Mr. Bryan does not really answer questions so much as pontificate. This is one politician who loooooooves to hear himself talk. The problem is he knows a great deal of facts, the reporters usually don't, and the result is he usually has them eating out of his hand. If you listen to him, you can see how the Democrats in the legislature ruined state finances during Governor Musgrove's term.
*Here are some 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. I include this in every post about PERS so the reader can have a basic foundation to understand PERS. 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%
2011: 25%
Current funding level of actuarial accrued liability: 62.2%. 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.
Earlier PERS posts:
Video & Reports from October Investment Committee Meeting
PERS charts
PERS budget hearing
PERS Commission hearing
August PERS Investment Committee video and reports
Resolution to study PERS passes
SLRP fund has over $11 million
What is SLRP?
19 comments:
@Kingfish, why do you hate PERS and state employees so much?
Maybe Kimgfish appreciates state employees (and others who participate in PERS - teachers, first responders, etc - and wants to see PERS fixed. Then there are the people who want to put their head in the sand and say nothing’s wrong with PERS. Eventually the music stops, my friend, and a lot of people depending on PERS won’t have a chair to sit in.
George Schlegel, the Chairman of Haley's Commission on PERS, wanted to turn PERS from a defined benefit system into a 401K system and thus totally destroy it.
The only good thing about being a pubic employee (police, fire, teachers, etc) in Mississippi is the retirement which is modest.
Why can't working people live decently in their old age? That retirement money is spent and thus
goes back in the economy.
Kingfish clearly does not hate pers nor its participants. But a $25 whiff is news worthy. That’s what the legislature did when they raised benefits. And they did it again when they failed to follow Haley’s study’s recommendations. And now they are doing it again by trying to cut the funding.
$25 billion whiff. Excuse me.
You know, toward the end of the 19th Century, ONE PERCENT per annum, was considered a safe and reasonable expectation for the growth of a person's (passively-invested) capital.
I tell others to expect 1.5 percent (over inflation), once all the highs and lows and taxes and fees are factored-in. Nobody listens.
So, 4.5% sounds really optimistic, to me. Those other percentages Mississippians deluded themselves into believing, are SURREAL.
I do better than that - by far - because there is little that is passive about me or my money. But the structuring of my estate (anticipating eventual dotage), and of the granddaughters' trusts, is predicated on those cautious antique expectations, above.
But don't mind me and my paranoia. Don't bother reading history, lest you miss the fun of repeating it.
Current retiree here, @3:35 has it exactly right. I hope to be around another 15-20 years and would like for PERS to be able to continue to pay benefits. So please someone have the guts to change the system before its too late!
Kingfish continually attacks PERS because it stirs emotions and makes folks like me comment ! The problems PERS is perceived to have were created by legislators who suddenly become experts in all areas of life when elected. Why would anyone want the inmates in charge of the asylum?!! The ONLY adults involved with PERS have been the PERS board members who have ensured a good rate of return at reasonable fees for many years. I trust the board MUCH more than these legislators who seem to want to get their hands on it. Why do you never hear legislators wanting to reform SLERP? Why does King fish never or seldom discuss SLERP[ SPECIAL Legislative Employees Retirement Plan ]?
"Why does King fish never or seldom discuss SLERP[ SPECIAL Legislative Employees Retirement Plan ]?"
Maybe he can't find it Googling the name and acronym you used.
It's SLRP - Supplemental Legislative Retirement Plan.
Eliminate SLRP
Eliminate 13th Check
Eliminate the obscene amount of useless administrative positions in
K-12 and Higher Ed.
Eliminate any future "capital improvement projects" whatsoever in the above two systems.
Then see where you're at. Why these dirt-dumb buffoons don't have the managerial courage to do their jobs is unfathomable. Throw the bums out if they can't do what they're elected to do. States and cities (and nations) can and do go bankrupt...then everyone's standing around pointing fingers like a bunch of children.
"Why does King fish never or seldom discuss SLERP[ SPECIAL Legislative Employees Retirement Plan ]?"
Well, dummy, you might learn how to spell it properly before you throw stones. And you little liar, enter SLRP in the search box. SLRP has been heavily discussed here, In fact, JJ is the only media outlet that has dissected it and broke the story about its existence. But you already knew that when you decided to troll.
When they ‘fix’ PERS, they won’t change anything for the current retirees. They’ll screw over the current and future employees, making them pay more, work longer and receive less in retirement, the same way they are going to ‘fix’ Social Security. Thanks Boomers, yall are first generation of Americans to leave the country in worst shape for your kids and grandkids than you received it. Y’all suck.
Receiving PERS retirement after 30 years is ludicrous when every other Mississippi taxpayer has to work 50 years or more to retire.
Schloegel was the worst mayor to ever happen to Gulfport city employees.
He cut benefits, froze salaries and people left in droves. The city is now a revolving door of employees who don’t stay long because Gulfport never recovered from the Schloegel years.
Had Schloegel gotten his hands on PERS, he would have destroyed it as well. The Republican Party in Mississippi wants PERS gone. Just look how they voted on HB1590 in 2024.
11:40 - You pulled those figures right out of your ascot, didn't you?
Other than those who have a well-placed, high-income, insurance covered working spouse, I've never known any PERS retiree who retired at 50-51 years of age who did not go into another career that took them to age 65 or higher.
And here's the latest Mississippi retirement-age figure readily available on the internet:
"Mississippi
The average retirement age in the state is 63 years. Moreover, the cost of living is 13.3% lower than the national average. All forms of retirement income are exempt from taxation in this state. Dec 9, 2023"
That's an average number of years worked toward retirement of 41-43 years.
Haley Barbour never wanted to do jack-shit about improving PERS or its fund management. He wanted his people on the Board so he could eventually wind up deciding who got which fund management contracts. No telling what he could have pocketed had that worked.
The same is now true of Dilbert and Tater.
Election has consequences. Control has rewards.
HA! The commission only advocated putting two non-voting members who had expertise on the board. You demagogues back then shrieked that was selling out to Wall Street. It wasn't true then and isn't true now.
The legislature will eventually allow towns, counties, and school districts to opt out and allow 401k or 403b for new hires. When that happens, the PERS ponzi scheme is over.
What Latino and others leave out is it will cost $10 to $20 billion to convert to a 401k.
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