Jackson Jambalaya

Reason Foundation policy analyst Steven Gassenberger told the House PERS Select Committee that the new hybrid plan the legislature adopted plus annual contributions of $110 million for four years would “make the system solvent,” as columnist Sid Salter put it.

“A $110 million over four years sounds high, but put it in today, so you can avoid devastation in the future,” Gassenberger said, according to the Magnolia Tribune.

Hmmm. $440 million does sound high until you remember PERS has a $26.5 billion funding gap, then it sounds petite.

The Reason Foundation helped advise the legislature on the hybrid plan it adopted with some controversy in May. The plan creates a new “fifth tier” in which all new employees (and legislators) will be placed beginning next year. That tier has no guaranteed 13th check, replaces the “high four” benefit base with a high-eight base, and offers both a 401k-like benefit and a pension.

Reason says the hybrid plan can put PERS on “a path to solvency.”

But it will take a lot longer than four years and much more than $440 million to get there – like 2055 if all of the Reason assumptions are met each year. Of course, if PERS could achieve model assumptions ….

 

Gassenberger’s published work on the Reason website has a more cautionary tone than his optimistic comments to legislators. “Mississippi policymakers should be warned that, while this reform does reduce long-term costs, it is not projected to reduce the chances of PERS becoming insolvent.” Essential to that, he said, is fixing PERS’ broken funding policy.

The Reason hybrid model calls for replacing the legislature’s four-year phase-in of .5% annual increases in employer contribution rates from 17.9% to 19.9% with an actuarially calculated rate. That rate, a senior Reason official told me, will vary between 25% and 29% to get PERS to full funding by 2055 (assuming all assumptions are met).

Based on 2024 numbers, each 1% increase would cost about $75 million annually. That calculates to a need for $457 million to $757 million a year for 30 years.

Meanwhile, legislators seemed to ignore a June Moody’s report. The credit agency called the new plan “one of the riskiest combinations of asset/benefit coverage,” as reported by Jackson Jambalaya.

Moody’s said, “It will take decades for meaningful savings, and thus meaningful credit benefit, to materialize,” and predicted PERS’s funding gap will jump to $32 billion on the current funding plan. Also, “the system will gradually move toward asset depletion” if a near-term investment loss occurs without offsetting major funding.

“There is a way that appears to be right, but in the end it leads to death” – Proverbs 16:25.

Crawford is the author of A Republican’s Lament: Mississippi Needs Good Government Conservatives.