By Sid Salter
STARKVILLE – Make no mistake, the fear being generated over the future of Mississippi’s Public Employees Retirement System has a political genesis. But the suggestion that PERS doesn’t need a substantial examination in order to stabilize the program for both present and future retirees is one not borne out by the facts.
Founded in 1952, PERS originally provided full retirement benefits to state workers when they had reached full Social Security retirement age. PERS is a system of retirement plans covering all public employees including public school teachers, the state Highway Safety Patrol, municipal employees and state legislators.
Revenue for the PERS system comes from three primary sources – investment income, employer contributions (paid by the taxpayers) and employee contributions (deducted from the pay of state employees participating in the PERS plans).
Earlier this year, Gov. Haley Barbour appointed a 12-member study commission was to evaluate PERS and recommend improvements that would streamline its organization and funding mechanisms. That action came in the wake of 2010 changes to the system by the Legislature that saw employee contributions raised from 7.25 percent to 9 percent, retirement eligibility was increased from 25 to 30 years for individuals hired on or after July 1, 2011, and the overall benefit formula was reduced for individuals hired on or after July 1, 2011.
PERS has at least an $8 billion taxpayer liability – state Sen. Chris McDaniel recently publicly cited “unfunded accrued liabilities” of “more than $11 billion” – and it’s growing faster than the ranks of new state employees paying into the system.
Yet retirees and government officials alike are wary of a myriad of proposals to “fix” PERS that range from bond debt proposals to changes in contribution rates. With retirees drawing benefits now outnumbering active workers paying into the system, the stresses on PERS are obvious and ominous.
Should they worry? The Pew Center on the States, state Treasurer Tate Reeves and other officials have been talking about needed reforms to protect the system for a number of years. But the “third rail” political nature of PERS makes any discussion of PERS reform risky for politicians.
Long before he was in line to assume leadership of the state Senate, Reeves said that between 1999 to 2002, lawmakers increased retirement pension benefits substantially without providing a funding mechanism.
“That was a period when investment earnings were robust and I suppose that legislators thought those returns would continue unabated,” said Reeves. “But when investment earnings dropped while benefit expenses increased, the unfunded liability grew as one would expect in those conditions.”
But the immediate politics of PERS is this – in the pitched battle for control of the Mississippi House of Representatives, PERS is an issue being used to motivate voters in legislative races. Democrats have made no secret that they see the state retirement system as an issue that could help them maintain control of the House and thereby control of the House speaker’s post – something Republicans want to gain in the 2011 elections.
Politics aside, both Barbour’s commission and the Legislature on both sides of the aisle face the daunting task of stabilizing PERS for the long haul. In this economy, that will be a tall and difficult order. But fact that the system requires some adjustments – particularly for new hires and to address the previously unfunded benefit increases – is undeniable.
Sid Salter is a syndicated columnist. Contact him at (662) 325-2506 or email@example.com.