By Bobby Harrison
Daily Journal Jackson Bureau
JACKSON – A key member of the Senate said Wednesday a proposal to prop up the state's employee retirement system will be part of the upcoming special session.
When asked if the complex process of issuing pension obligation bonds will be part of the session, Senate Finance Committee Chairman Tommy Robertson, R-Moss Point, said, “yes sir.”
Robertson was one of about 15 legislators who heard a report at the Capitol about money troubles facing the retirement system.
Gov. Haley Barbour will call a special legislative session in May or June to consider a budget. He has said that pension obligation bonds might be part of the special session, depending on whether the House and Senate could agree.
Supporters of the bond process say it could solve some of the money problems facing the Public Employees Retirement System, which has been racked by three bad years for the stock market. The bonds also could free up the general fund for education and other vital state services. The state is facing a budget shortfall of as much as $500 million.
Part of that shortfall is the $30 million in general funds for PERS to replace stock market losses. Financial experts say an additional $30 million must be placed in the fund next year.
The fund is not in danger of going broke, Tom Cavanaugh, an actuary with Mellon Resources in New York, told legislators. But about $60 million must be added over the next two years to meet federal guidelines on how much money must be in the system, which provides retirement benefits for state employees and school teachers.
An alternative is pension obligation bonds. The state would issue $2 billion to $5.7 billion in bonds for the retirement system. Supporters of the concept say that because of current low-interest rates, the state could sell the bonds and repay them at 6 percent or lower.
At that rate, the state would be paying less annually on the bond issue than it would have to pay to shore up PERS through the more traditional pay-as-go format.
Still, the pension obligation concept would drive up the state's bonded indebtedness, and the state could lose money if the economy sours and the stock market plummets.
But with interest rates still at historic lows, many say this is the time to issue the bonds.
Contact Bobby Harrision at (601) 353-3119 or BHarri9015@aol.com