Support for changing PERS cost-of-living adjustment appears low

By Bobby Harrison | NEMS Daily Journal Jackson Bureau

JACKSON – The recommendation of Gov. Haley Barbour’s study commission to freeze the cost-of-living adjustment for three years for current and future public sector retirees does not appear to have much legislative support.
Rep. Philip Gunn, R-Clinton, who the incoming Republican House majority prefers for speaker, said recently he had not read the report yet so he had no comment.
But other legislative Republicans said making changes to the cost-of-living adjustment is a non-starter. Passage of the proposal is up to Republicans since it appears legislative Democrats are unanimously opposed to the proposal.
Many legislative Republicans have indicated they do not believe it will pass. Rep. John Moore, R-Brandon, said he is not paying any attention to the issue because “I don’t believe we will vote on it.” If the Legislature does, he said he would oppose it.
The recommendation – perhaps the most controversial in the study released last week by the Commission – is that the cost of living adjustment, which is currently 3 percent each year, be frozen for three years for all current retirees and moving forward, new retirees would not receive the 3 percent annual increase for the first three years of retirement.
And in the future, the cost-of-living adjustment would be capped at 3 percent, but tied to the consumer price index, meaning if it increased 2 percent, then state retirees would receive only a 2 percent increase. Pat Robertson, PERS executive director, has said when the Legislature opted to make the cost-of-living adjustment 3 percent annually, on average the rate of inflation was a little more than that yearly.
The cost of living adjustment is commonly referred to as the 13th check since many retirees opt to get it in a lump sum.
Barbour, a Republican who is finishing his second and final term, formed the Commission because he has said he does not believe PERS is sustainable. The Commission – and the possible ramification on public sector employees – became an election issue.
Rep. Billy Denny, R-Jackson, said he signed a letter promising to protect the 13th check, and he would honor that pledge.
Responding to Democratic charges that PERS was in jeopardy at the hands of Republican politicians, Denny and other House Republicans signed a letter stating, “We, collectively and individually, will not support any suggestion, idea, thought or plan to eliminate the 13th check or in any way to change, alter or amend, in whole or in part, the arrangement current retirees and current employees have with PERS.”
The House Democratic Caucus recently reiterated its opposition to tampering with the cost-of-living adjustment, stating, it will oppose “any recommendation that would renege on a promise that was made to current or retired employees. For that reason, we will oppose the recommendation to freeze and or reduce the annual cost of living adjustment. We do not believe that there is any crisis at PERS nor do we believe the drastic changes recommended in the Commission report are necessary.”
PERS provides retirement benefits for state employees; local government workers, including police officers and firefighters; public school personnel, including teachers; and university and community college faculty. In total, almost 375,000 current and former public employees have some financial stake in the system.
The system, hit by a drop in investment earning and by enhanced benefits passed in the late 1990s, currently has 62 percent of the funds needed to pay its liabilities over the next 30 years. The industry recommends having 80 percent of the funds needed to pay those 30-year liabilities.
But Rep. Johnny Stringer, D-Montrose, said it is not unusual for the unfunded liabilities in the system to increase during tough economic times. He said in 1980s, the system was funded at less than 50 percent of the 30-year liabilities.
Rep. Mac Huddleston, R-Pontotoc, also said he signed a pledge to protect the cost-of-living adjustment.
“I don’t see any drastic changes coming in the near future,” he said.
Another part of the Commission’s proposal that might be as controversial as tampering with the 13th check would be for the Legislature to study allowing people in the system to personally make investments and have part of their retirement benefits be based on those earnings. The current system is a defined benefit plan where the benefits retirees receive are not tied to fluctuations in investment earnings.
Democrats also have been adamantly opposed to that proposal.
Lt. Gov. Phil Bryant, who will replace Barbour as governor in January, said he wants to work with the current PERS board on issues surrounding the system. Bryant, who before the election voted in favor of a resolution in a legislative hearing to protect the cost-of-living adjustment, said recently, “I am not saying I am for any of the recommendations, but I am saying I am certainly willing to listen.”
In the same interview, though, he said, “the 13th check – clearly not taking that away. Nobody will have that.”
Other recommendations would:
* Place more financial experts on the board. Currently, the board consists of people in the system, a gubernatorial appointee and the state treasurer.
* Change the age to 62, instead of 60, to draw full benefits if vested. Under the recommendation, a person could get full benefits with the exception of the cost-of-living adjustment at age 55 with at least 30 years of service. The cost-of-living adjustment would kick in at age 62.