One of the biggest contributors to the Mississippi economy is a source that might not immediately come to mind: the Public Employees Retirement System (PERS) of Mississippi covers an estimated 320,000 people. It 2004, PERS paid out $1.1 billion in retirement benefits, which no doubt had a major impact on personal spending in the state.
“We affect a lot of lives out there especially when you consider that most of those members have families — spouses and children,” said Frank Ready, executive director of PERS. “We have about 65,000 people who are retired from the system, and about 165,000 who are actively participating. They are employed by the state and contributing to the system. Another 90,000 to 100,000 are inactive. They are no longer employed by their public employer, but have money in the system. If you terminate public employment and go elsewhere, you can leave money in the system.”
It is estimated that about 95% of the retirement benefits remain in the state, as the checks to the 65,000 retirees are mailed to in-state addresses.
“It has a significant impact on the state’s economy in terms of people’s ability to purchase goods and services,” Ready said. “I don’t know of any other business in the state that has that kind of impact. We priced out the investment portfolio this week, and it stood at $16.8 billion.”
The fund portfolio has had its ups and downs, along with the rise and fall of the stock market. In the mid- to late- 1990s, market returns were very high.
“Then, beginning in 2000, we entered a period of the greatest downtown in stock values since the Great Depression,” Ready said. “But the economy turned up over a year ago, and this past fiscal year ending June 30, 2004, the return on the portfolio was 14.6%. After two years of a severe down market, we have returned to what we consider a good condition. The return on the portfolio was good.”
During the previous fiscal year, 71% of the revenue that came into the system came from investments on the fund. About 12% came from contributions made by the employees into the system, and 16% came from contributions made by the public employer.
“The return on investments is now playing a great role in funding the system, and will continue to do so,” Ready said.
PERS is the retirement system for nearly all non-federal public employees in the state including the state, public school districts, municipalities, counties, community colleges, state universities and such other public entities as libraries and water districts. PERS was established in 1952.
Benefits are based on a formula that takes into consideration the public employee’s salary while working, and the length of service. Beginning in the second year after retirement, benefits are adjusted up 3% each year. Those cost of living increases are set by state statute.
State statutes also determine the broad makeup of the investment fund, which currently is composed of about 50% domestic equities, 15% international equities, 25% in fixed income securities and 5% is in real estate. Specific stocks and securities are selected by professional money managers selected by the board of trustees.
Eight of the 10 board members are elected by constituent groups. For example, state employees have two representatives, higher education has one and retirees have two slots. Periodically when there are vacancies, an election is held to select the board members. Currently, there are 21 candidates running for one position open under the retiree category. Board members are required to file an annual report with the Ethics Committee.
By managing the pension investments wisely, the taxpayers of Mississippi come out ahead, Ready said.
“We are at a point that the system has become a contributor to the Mississippi economy, witnessed by the fact we are putting significantly more money out there in terms of benefits to retired members than we are bringing in from contributions from employers out there — in other words, the taxpayers,” Ready said. “So I think that is a significant development.”
Ready said PERS is committed to helping provide members and their beneficiaries with financial security and protection from financial hardship, both now and into the future. Those benefits and services are vital to the well-being of Mississippi and the people who reside in our state.
“The quality of Mississippi’s public services is in large part a reflection of the quality of the public workforce,” Ready said. “One way to assure that the state and its citizens receive expected and necessary services is for state and local governments to attract and retain quality employees. A valuable and cost-effective array of benefit plans helps to accomplish this objective.”
In addition to the primary retirement, survivor and disability benefit programs contained in the retirement plan, PERS also administers a variety of other employee benefits including a retiree health insurance program and supplemental retirement savings plan.
PERS is also working to be prepared to meet the needs of a changing public employee and retiree population. The projected ratio of retirees to active employees is expected to increase drastically over the next 10 years.
“As a state, we must plan today to meet the needs of this changing population,” Ready said.
For more information on PERS, see the Web site www.pers.state.ms.us.
Contact MBJ contributing writer Becky Gillette at email@example.com.