Jackson Jambalaya

One billion dollars.  Read that again: One BILLION dollars.  The PERS COLA soared to a record $1,010 billion in 2025. As the ostriches shriek while burying their heads in the sand, the Cost of Living Adjustment that is not a cost of living adjustment spirals out of control.  

The chart below tells the story of the PERS COLA. 

 

 

The COLA was $211 million in 2005.  It doubled in nine years and doubled again in ten years as the amount of the COLA increase rises every year.  Indeed, the amount of the increase was a paltry $22 million in 2006 and $43 million in 2006.  The COLA increase for 2025 is a whopping $56.6 million as the increase keeps well, increasing.  

Posted below are the annual COLA payments stated in the annual comprehensive financial reports. The annual increase in COLA payments is stated in parenthesis. See the pattern? 

2025: $1,009,534,000 ($56.6 million)

2024: $952,896,000 ($51.8 million)

2023: $901,099,000 ($51.3 million)

2022: $849,803,000 ($50 million)

2021: $800,170,000 ($48.5 million)

2020: $751,646,000 ($51.7 million)

2019: $699,947,000 ($50 million)

2018: $650,465,578 ($47 million)

2017: $603,318,841 ($43 million)

2016: $559,888,063 ($43 million)

2015: $517,283,072 ($41 million)

2014: $476,401,043 ($38 million)

2013: $437,808,691 ($36 million)

2012: $402,514,750 ($33 million)

2011: $368,645,000 ($30 million)

2010: $338,628,000 ($25 million)

2009: $312,471,000 ($31 million)

2008: $281,124,000 ($25 million)

2007: $255,939,000 ($23 million)

2006: $232,710,000 ($22 million)

2005: $211,530,000

The COLA increases every year because it is not a traditional cost of living adjustment based on inflation but is instead a guaranteed increase in benefits compounded annually.  PERS will pay COLA benefits even if the economy enters a period of deflation. 

The PERS Retiree handbook explains:

PERS retirees and beneficiaries who have been receiving benefit payments for at least one full fiscal year are eligible to receive an annual Cost-of-Living Adjustment (COLA). If you retired effective July 1, you would be eligible for the COLA during the fiscal year beginning 12 months later on July 1. If you retired effective August 1, you would be eligible for the COLA during the fiscal year beginning July 1, 23 months after the effective date of retirement.

The COLA is equal to 3 percent of your annual base benefit for each full fiscal year of retirement prior to the year in which you reach age 55 (Retirement Tiers 1 through 3, see table below) or 60 (Retirement Tier 4), plus 3 percent compounded for each fiscal year thereafter, beginning with the fiscal year in which you turn age 55 (Retirement Tiers 1 through 3) or 60 (Retirement Tier 4). (See the Appendix for simple and compounded COLA interest rates for years in retirement.)

 

 

Retirees grew to  120,000 members in 2025, nearly doubling from 64,000 in 2005. Although retiree growth has shrunk, the retiree population continues to grew each year while there are fewer employees paying into the PERS system every year.  

The PERS Board of Trustees shocked everyone when it approved a 5% rate hike for employer contributions in 2022. Facing a backlash from Mayors and counties, the Legislature revoked the Board's power to increase contribution rates and abrogated the power for itself.  The Solons in the Capitol cut the rate hike in half and created a "Tier 5" classification for new years.  

 Tier 5 employees are enrolled in a program similar to a 401k plan.  Tier 5 has no COLA.  

Kingfish note: That was the news, now for the opinion. 

Public employees may hate Tier 5 but they are the ones who put themselves in this position.  If they had only followed Haley's advice, there would have been much less pain. 

Governor Haley Barbour created a PERS study commission in 2011 amid much opposition. JJ reported on December 15, 2011: 

  *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.

 

 

The recommendation disappeared into a cone of silence.  The Democrats said there was nothing wrong with PERS a "return of the markets" would not cure.  However, PERS didn't come back when the markets did as funding level stalled when PERS enjoyed 25% and 32% returns.  The two State Senators who dared to merely discuss PERS lost their seats in 2019.  Lesson learned as the politicians in Mississippi kissed the PERS golden calf and promise not to touch the Thirteenth Check even as it skyrocketed.

The PERS funding level is now stuck in the mid-50% range despite an 11% return last year and a $100 million appropriation by the Legislature.   The first responders can wail all they want but they are the ones who put themselves in this position by refusing to compromise over the years.  

 

* Retirees can receive the COLA as a lump sum, hence the thirteenth check moniker, or in monthly payments.