House backs higher pension contribution

By Bobby Harrison/NEMS Daily Journal

JACKSON – Already facing the possibility of furloughs and layoffs, employees of state and local government, as well as public school personnel and university staff, could have less take-home pay starting July 1.
The House voted Thursday, at the behest of Gov. Haley Barbour, to increase the employees’ contribution toward the retirement system from 7.25 percent of their paycheck to 9 percent. The measure was approved 81-39.
The legislation was passed Thursday in a special session that Barbour called in the midst of the current regular session. The Senate is expected to take up the proposal today.
“Nobody here likes this,” said Barbour, flanked by members of the House leadership and Lt. Gov. Phil Bryant during a Thursday morning news conference in his state Capitol office where the special session was announced.
The legislation affects about 167,000 people across the state. Among them are state employees, university and community college personnel, public school teachers and other education personnel and county and city government employees.
“It was an unpleasant option – one we did not want to do,” said House Speaker Billy McCoy, D-Rienzi. “It is part of the economic times we are living in. Hopefully, we will be able to rescind this increase” in the coming years.
Meeting obligations
Robert Rhoads, a deputy administrator with the Public Employee Retirement System, said extra money is needed to ensure that the retirement system’s obligations are met.
Rhoads said the downturn in the stock market and enhanced retirement benefits approved by the Legislature in the late 1990s and earlier this decade have fueled the need for more money.
To meet that need, the PERS Board has voted to increase the contribution level for state agencies, local governments, universities and school systems from 12 percent to 13.56 percent of the salaries of their employees.
The increase, which takes effect July 1, will cost the state $70 million and the local governments $20 million, according to information provided by the PERS Board.
The legislation passed Thursday was designed to allow PERS to rescind its decision to increase the contribution level for government agencies. The PERS Board has the authority to increase the contribution level on government agencies – or employers – but not on the employees.
Since the additional retirement costs were not factored into the budget currently being passed by the Legislature, the additional $70 million that would have to be paid toward the retirement system would result in a cut for the state agencies.
“It would result in layoffs pushing 1,000 or more if agencies have to take this amount of money out of their budget,” Barbour said.
Doing nothing?
The other option would be to take the funds out of reserve to plug into the retirement system. McCoy said that would have been his choice, but Barbour rejected that alternative.
Sen. Hob Bryan, D-Amory, said another alternative would be to do nothing. He pointed out the stock market is improving and the shortfall will most likely correct itself in the coming years.
Under the bill passed by the House, the level of employee contributions will have to be reviewed by the Legislature again during the 2012 session. Plus, the bill provides additional minor benefits for the employees, such as one-half day of accrued leave each year.
The retirement system’s health is another in a long line of budget woes facing the Legislature this year. Legislators, dealing with a dramatic drop in state tax collections, are trying to pass a budget for the fiscal year beginning July 1 and wrap up the 2010 regular session.
On Wednesday, most of the budget bills were passed, and most state agencies face cuts that many believe will lead to layoffs and furloughs. On Thursday, four budget bills remained to be finalized.
The biggest of those, Medicaid, was being held up as House and Senate leaders haggled over whether to deal with a $14 million deficit in the current fiscal year. Barbour has announced a cut in the reimbursement rate for Medicaid providers to deal with the shortfall.
House Public Health Chair Steve Holland, D-Plantersville, said he still was hopeful late Thursday that funds could be found to plug the deficit in the current fiscal year.
Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@djournal.com.