By Charlie Mitchell
OXFORD – Few, if any, retirement systems for state employees have been as well-managed as Mississippi’s. Few, public or private, are as solid.
PERS (for Public Employee Retirement System) is a point of pride for the state. Its leaders and directors have been people of integrity, recognizing the sacred trust inherent in their roles.
That doesn’t mean PERS is immune.
It is (1) a creature of the Legislature, after all, and (2) even sound decisions made on solid projections can turn out to be off the mark.
The good news – the really, really good news for state employees (and I am one of them) – is that PERS actually has investments, making it unlike Social Security and a smattering of other public and private pension funds.
When retirement funds are deducted from a state paycheck, that money plus a share from the employer’s budget is retained. PERS has cash in the bank, hovering around $20 billion for the past several years. The Legislature can’t touch a dime of it, not even as collateral for loans.
Social Security is very different. Yes, money is taken from paychecks and employers pay matching funds into the federal pension plan, but Congress “borrows” every penny as soon as it arrives and leaves an IOU in a cookie jar. That makes Social Security a mere promise to pay. Money isn’t actually there as it is with PERS.
Anyway, while state elections were looming this time last year, a blue-ribbon study panel came forth with its report on PERS and the much smaller separate funds PERS manages for municipal employees, state troopers and legislators.
The news was not all good. Earlier projections of the return on investment of the $20 billion turned out to be too optimistic, given marketplace events since 2008. PERS needed to make benefit adjustments or receive an infusion of cash to make accountants happy, to reach a point where reserves were ample to cover retirees well into the future.
Immediately, candidates for statewide offices and the Legislature fell all over themselves assuring retirees and state employees that all was well, that they understood and appreciated the aforementioned sacredness of the retirement accounts.
Offering such assurance was smart. About 165,000 people (voters) are PERS members and about 210,000 people (voters) are drawing retirement. It only takes about 500,000 votes to become governor.
Anyway, elections were held.
The Legislature convened.
And the can was kicked down the road.
Of course, what that means for the 2013 legislative session – and for budget planners – is that last year’s smaller fiscal challenge to fix PERS looms as this year’s larger challenge.
Retirement plans such as Mississippi’s are not complex.
Income is derived from workers, employers, investments and, if needed, direct allocations of state funds.
Expenses are the monthly checks to retirees based on their contributions to the system or “cash-outs” to employees who get back what they’ve paid in if they leave before reaching retirement eligibility.
Retirees also receive one additional check per year – known as the 13th check – that is actuarily based on cost-of-living increases since retirement. (Those who don’t understand think of this as a bonus, but it compares to the COLA increases built into Social Security payments each year.)
It is the math of such as system that gets complicated. How much to pay in to generate the needed yield is a best-guess. There are even Ponzi-like elements. For example, state employment grew sharply each year for the past 25 years, meaning more and more people were paying in to the fund that started with only a few retirees.
It’s when employment levels off or the economy stalls that new calculations become necessary.
That’s where we are today.
And where we were the same time last year.
The state has employees and computers fully capable of looking at the books and coming up with strategies to keep PERS as solid as it has always been.
But it takes politicians to put those strategies into action.
So far, there’s been a lot of time wasted yapping about what was or wasn’t done right or wrong in years past. That’s entertaining, but fixes nothing.
What’s missing is a leader (or leaders) who step up and say, “Hey, let’s do this.”
And do it.
PERS has a solid history. Whether its future is equally good depends on whether lawmakers, who talked the talk to get votes last year, will walk the walk when decision time comes.
Charlie Mitchell is a Mississippi journalist. Write to him at Box 1, University, MS 38677, or email email@example.com.