Legislators slapped themselves on the back earlier this year as they congratulated themselves for fixing PERS. Once again, rhetoric fails to meet reality as the PERS financial reports released yesterday tell a different story. Read and weep.
The funding level only improved from 55.9% to 56.7% despite:
* The Legislature dumping $100 million into the system
* Low retiree growth of 1,579 new retirees. Retiree growth averaged over 3,000 new retirees a year a decade ago.
* 11% rate of return on the PERS portfolio.
* Creation of a "Tier 5" for new employees that extended retirement age and abolished the "COLA."
* The actuarially accrued unfunded liability only increased $173 million.
This is the reality of PERS. However, reality means little at the Capitol even though the ratings agencies are breathing down the state's neck. Earlier post.
The PERS Board of Trustees can do little as the legislature took most of its power away this year after the Board planned to implement a 5% employer contribution rate increase. Only the legislature can increase contribution rates and it cut the rate increase in half and spread it out over five years.
Note: JJ will soon publish a thorough analysis of the 2025 actuarial report. This post is just a quick snapshot.
9 comments:
If you watch the recording of the PERS board meeting, just after Daniel Sparks gives one of his speeches about all the Legislature did to save PERS last session, including eliminating SLRP because "it was a bad look," you will hear the actuary explain that because they eliminated SLRP for new legislators there will be fewer and fewer people paying into SLRP so the employer (the State) will have to put more money into it to cover payments to the SLRP retirees. Add that to the issues Tier 5's 35 year retirement has created for first responders and it is clear that the PERS changes Delbert forced in exchange for the tax cut were not well thought out.
This has to stop. It should be ended asap.
The financial benefits from Tier 5 won't appear for decades, but the hiring issues local police/fire departments see, as well as public schools, will be immediate. The Legislature passed Tier 5 so they could go home and claim they did something to "fix" PERS. They didn't do anything. They did what every Legislature has done since their counterparts in 1999 created the problem -- they dicked around and prayed no one would notice.
Doesn't matter if anyone likes it or not, the State of Mississippi has an unquestionable legal obligation to pay benefits to every current retiree/beneficiary, and anyone who retires under Tiers 1 through 4 (straight benefits -- the COLA *can* be changed, but good luck getting the fraidy cats in either the House or the Senate to mess with that). Even if the PERS fund itself disappears, the State is still on the hook -- PEER and dozens of attorneys serving at least four governors have done the legal legwork on that question, and it is what it is. People can bitch about it until the Rapture, but the laws are the laws.
As long as the only Mississippians who might see any pain (like potential COLA impact) from PERS issues were public employees, then Legislators and most taxpayers were content to do nothing other than complain -- no one has ever lost politically beating up on public school employees ("woke morons who get summers off") or state employees ("lazy woke idiots suckling at the taxpayer teat"). But the bond rating agencies (not generally considered woke) coming for the state is going to cause a world of hurt. It's going to cost more for Mississippi and its cities and counties to borrow money, and more taxpayer money will end up going to debt service.
Filling that funding hole could have been relatively pain-free 20 years ago, but the Legislature chose not to do it. As a result, the hole has gotten bigger every year. They created the problem, they ignored the problem, and they own the problem. They need to find the funds (and the balls) to fix it.
We are also in Year 4 of a bull market. I’d be interested to see how the unfunded liability has changed during this bull market.
Told you the 13th check is the problem. The investment % the fund earned should be put back into the fund and not given out. The money from income should go back to fund like any other program does. Think where you would be had the income gone back into the fund for the last 15 years, up 25% in the total fund holdings?
This bull market year 4, 50% of the income growth is being given out in 13th checks, you can't do that, 100% has to go back in the fund.
Must be time for another tax cut
The legislature in charge of PERS...what could go wrong?
First responders, etc. should be on exactly the same system as any other full-time PERS positions, and should be prohibited from double-dipping the same as other PERS recipients.
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