By Bill Minor
JACKSON – I’ve no intention of adding to the worries of PERS retirees (my wife is one) or current public employees about the system’s solvency, but I feel compelled to revisit the PERS’ situation since state Treasurer Tate Reeves, the self-proclaimed “watchdog” looking after the system’s finances, has taken me to task for a previous column.
Reeves cherry-picks that PERS’ investments had a 14.1 percent return for 2010. That’s good. But he overlooks salient facts about pertinent other years that aren’t. For the three years prior, returns showed a minus 5.5 percent; for five years, plus 2.1 percent. For ten years, plus 2.3 percent.
Those numbers are considered dismal in view of the benchmark annual yield of 8 percent to maintain the fund’s stability. Even with the one year spike in returns, PERS’ funding made no progress according to the system’s own figures. In fact, it lost 3.1 percent in its funding liability.
Let’s face it, Mississippi’s PERS is in trouble, just as is most every other state pension system. Nationwide, reports show, state retirement plans now have a $3 trillion (that’s a “t”) unfunded liability. Mississippi’s unfunded liability, PERS has confirmed, is $11.3 billion.
It didn’t help last week when the board of the Public Employees’ Retirement System Board, at the behest of Gov. Haley Barbour and key legislators, voted 6 to 3 to delay for six months a .93 percent increase in employer contributions to help shore up the system. To his credit, Reeves broke with his fellow Republican, Haley Barbour, and spoke up for the increase.
I was covering the Legislature when the state pension system was created years ago, and I commended lawmakers for launching such a progressive program. School teachers back then, and for a number of years, had their own retirement plan. Eventually they merged with the state employees’ system.
Lawmakers for years were unhappy that they didn’t have a pension plan. Drooling whenever they made any law changes in PERS, legislators not only legislated themselves under the PERS plan, but within a couple of years, created a special plan for themselves which carried higher retirement benefits and had a short vesting period. Remember, they are part-time employees, technically working only one-third of the year. I wrote many critical articles, and nicknamed the plan, officially called SLRP, as “SLURP.”
Reeves as state treasurer is the only state elected official designated by law as a member of the PERS board of trustees. More or less, he is the state’s fiscal agent on the board, since the other members are lay persons who do not deal with the investment industry. In his eight years as a member of the PERS board, Reeves has often served as chairman of the investment committee or president of the board.
Yet, as PERS records show, in fiscal 2010 the system paid $44.7 million in fees to investment managers and another $9.8 million in commissions. Besides, the pension plan paid out $500 million for consulting to Mercer Investment, a subsidiary of Marsh and McLennan, a financial services company. Mercer was hired three years ago when another firm, Callan Associates, was fired. It is well known in the financial world that Mercer was sued for misconduct by three pension systems and since December has abandoned handling new public pension plans.
My point in focusing attention on Tate Reeves as he now seeks higher office of lieutenant governor is that he boasts of a record as the “taxpayers’ watchdog.” He has had a prominent role in managing PERS’ assets, which, importantly, holds over $20 billion of Mississippians’ money in trust. It is arguably the state’s largest financial institution. Seemingly, Reeves is willing to sweep its troubles under the rug as he reaches higher on the political ladder.
I won’t delve into his glowing assessment of the condition of MPACT, the state’s guaranteed college tuition plan he runs. Suffice it to say, however, that The Wall Street Journal recently wrote that all but 11 states have abandoned or scaled down their prepaid college savings plans because of the bad economy and rising college tuition. Do you hear the sound of whistling past the graveyard down here in Mississippi?
Columnist Bill Minor has covered Mississippi politics since 1947. Contact him through Ed Inman at email@example.com.