A $365 million bag of pain is about to hit the Mississippi legislature next January, and our own bad policy keeps filling new bags. The Public Employees’ Retirement System board is considering a host of ugly fixes for the state’s ailing retirement fund this week, including the $365 million budget request. But few people are talking about the self-inflicted nature of the crisis.
The board was not pleased with its list of options at the Aug. 24 meeting and anxiety manifested early. Board member George Dale was particularly dubious of asking the legislature for such a large cash infusion.
“That $365 million request—how will that be received?” he asked board legislative liaison John Read.
“Oh, it’s gonna be received the exact same way in three years when they get another 5% request (from us),” Read answered.
Dale pointed out other states who have refused to shore up retirement fund deficits hurt “their bond rate and cost them more than it would have cost had they kept their pension plan solvent.”
State Treasurer David McRae, also a board member, warned that PERS could become “the albatross to our (state’s) credit rating.”
Bickering briefly ensued when board member Randy McCoy accused the legislature of imposing “unfunded mandates” upon PERS when it voted to implement benefit increases between July 1, 1999 and July 1, 2002 for members and retirees. Legislators, he said, “passed this thing and didn’t pay for it.”
Read, who was then a legislator, told McCoy “not one word came from this side of the street saying it was going to be bad.”
“ …The legislature did not stand and say, ‘by God, we’re gonna make ya’ll do this,’” Read said, and he warned many legislators will view the $365 million bailout as a demand for non-PERS members to fund somebody else’s retirement, without personal benefit.
A second proposed fix involves the creation of a new Tier 5 designation for state, county, and city employees that removes a mandatory Cost-of-Living Adjustment (COLA) increase to new members.
McCoy said the new tier essentially reduces new hires to second-class status. “… [T]hey’ve got a reduced benefit. And some might argue they got no benefit,” he warned.
Public Employees’ Retirement System Executive Director Ray Higgins downplayed the Tier 5 designation as merely “the possibility of a COLA, as opposed to a guaranteed COLA,” and he reminded the board it would only apply to new and future employees.
But PERS employers will still face the possibility of an increased contribution rate of 2%, with more increases likely. A 2% contribution hike may not sound like much but Hattiesburg Mayor Toby Barker said his city will need to find nearly $3 million to fund its employees, which could lead to tax hikes or service cuts.
Dale predicted the increase was going to “give heartburn” to many cities and counties, while board member Kimberly Hanna predicted the combination of contribution hikes and COLA cuts could complicate the hunt for first responders and other vital employees who are already difficult to recruit.
McCoy said the double whammy could even open a calamitous “Pandora’s Box” by pushing PERS participants to invest their retirement elsewhere and further hollow out the weakened fund.
History of the Hole
The fight would not be so sour without the haunt of bad old decisions. The retirement system does not normally request legislative infusions, but instead depends on contributions from members, employers, and investment earnings. However, the stock market isn’t likely to buck trends and deliver a windfall over the next five years, so the money will probably have to come from ballooning employer/employee monthly contributions, legislative appropriations, or both. Either way, Mississippi now faces the prospect of a choice between a whopping payout from all state residents who don’t benefit from PERS or an even bigger hike on a shrinking pool of public employees who aren’t known for their big, generous paychecks.
It will be a punishing fight over the next 10 years, and Rep. Omeria Scott, D-Laurel, says Mississippi can blame it on conservative leaders’ crusade for small government.
“It’s rich for them to be talking about their retirement system. You know why it’s in bad shape? Privatization,” Scott told BGX. “Cities have privatized. The state has privatized. These leaders are bragging about all the jobs they’ve eliminated. Well, what did you expect to happen when you eliminated 10,000 people paying into PERS?”
Scott pointed out the state of Mississippi has privatized nearly everything from call centers to child support collections. In 2016, Ridgeland company Young Williams proudly announced a contract to serve more than a quarter of a million child support cases throughout the state. In their press release they “committed to hire all public employees who currently staff these offices at or above their current wages.” But there was no mention of employees and contract workers contributing to PERS. Company representatives did not return calls.
The state has lost more than 5,000 total active members just since 2020. It had about 150,000 PERS contributors in 2020, but only about 145,000 contributors in 2022. And both years represent a severe drop from 2014, when the state had 161,000 total active members.
State auditor Shad White confirmed the total number of state employees had plunged“over the last 15 years—and even more noticeably in the last seven years.” A strong conservative and a fan of government cuts, White insists the state “should continue to ‘right size’ government to eliminate waste.” He says policymakers should ensure “employment reductions do not interfere with core functions of government, like responding to disasters or maintaining public safety,” but he neglected to point out in his report that they’ve already failed to do that.
Shrinking government is apparently taking a bite out of more than just PERS. An August Youth Court Commission meeting made clear school-age youth are falling through ever-widening holes in the state’s safety net. Gerald Martin, chancery judge of the 13th Chancery District of Covington, Simpson, Smith, Lawrence and Jefferson Davis counties, said his territory relies on the state for youth services and truancy officers. That’s a pity because the truancy system in his district has largely melted away.
“I don’t have youth services officers available in all of my five counties on any given day,” Martin told the commission. “… On any given month, I may or may not have a youth services officer. I may have a supervisor come in and cover one or two days a month, so they’re not able to go out and keep up with our kids. If (kids are) on probation, we don’t have anybody to go out to their school and keep up with their grades, or (see) if they are attending, or check on their households, or do anything.”
Children Suffer with Shrink
Martin said vulnerable children and families had it much better in the 1990s with two full-time youth services officers. But that is no longer the case.
“A sheriff from one of my counties called this week, talking to one of the local school officials about problems they were having in one of the schools and … I don’t remember if he was referring to the absenteeism rate or the attendance rate, but either way, it was 62 percent.”
Marion County youth court referee Renee Porter warned in the same meeting her county spent the entirety of last year without a truancy officer, and when they finally got one in January, the woman filed 78 truancy cases out of the bottleneck. Children with autism, she added, suffer particularly hard under the state’s dereliction of duty because their problems often do not reveal themselves outside of truancy procedures.
“I can tell you some stories that just bring tears to your eyes,” Porter said.
While state services erode under the pretense of “eliminating waste,” Higgins told BGX that PERS is also feeling the pain of a one/two combo of dipping participation and more senior employees moving into retirement.
“We refer to the situation as a declining active and retiree ratio. Over the last 20 years, the number of actives paying into the system has declined, but retirees are living longer too,” Higgins said. “I don’t have the figures directly in front of me but over the last 10 years, from memory, I think the number of actives may have gone down around 10 or 11 percent and the number of retirees has gone up about 26 or 27 percent.”
Scott said PERS is a complicated system with plenty of moving parts, but one cog in that machine is undeniably caught by the loose wrench of idiot policy.
“The only other time we had a problem with our retirement system was back in 2008 with the recession,” Scott said. “But then these small-government Republicans got in charge and started cutting out employees. The recession wasn’t our fault, but what we have now is a self-inflicted injury.”
This article originally described the 2% employer contribution as facing "employees," rather than "employers." We apologize for the absence of clarity.