Home » NEWS » Banking & Finance » BILL CRAWFORD: There is no political will to fix PERS

BILL CRAWFORD: There is no political will to fix PERS

By Bill Crawford

Ask your favorite state or local officials if they have seen this statement:

“A contribution rate of 16.29% of active members’ compensation for the 2014/2015 fiscal year would be needed in order to keep the anticipated accrued liability payment within 30 years in accordance with GASB Statements 25 and 27.”

It’s at the bottom of Page One of the annual financial valuation of PERS, the state retirement system.

Last year PERS adopted a funding policy “aimed at stabilizing the employer contribution rate” and said that rate would be fixed at 15.75 percent for 30 years.

Looks like 15.75% isn’t high enough…and sticking with that rate will make PERS noncompliant with accounting rules.

PERS also said last year, “The funding policy also establishes a goal for the System to be more than 80.0 percent funded by 2042.”

However, the annual financial valuation showed PERS’ funding level dropped to 57.7%. In 2007 the funding level was 73.7%. It has dropped every year since.

Said another way, in 2007 PERS’ unfunded liabilities totaled $7.07 billion. Today they total $15.05 billion.

And this was supposed to be a good year for PERS. After all, investment earnings averaged over 13% for the year. So, why the negative results?

Well, it was a number of things.

First, the number of active employees decreased (567) while the number of retirees increased (3,385). Fewer employees paying in to support more retirees drawing out undermines the system. In 2004 there were 2.5 workers for each retiree. That has trended down to 1.8 today.

Second, average payroll decreased .2%. PERS’ funding formula depends on average payroll increasing at least 4.25% each year. (The higher the payroll the more the contribution rate generates.)

Third, despite contribution rate hikes, PERS continues to pay out more each year in benefits and administrative expenses than it receives in contributions. The shortfall this year was $707,632. This trend puts stress on asset growth. Indeed, since 2007, actuarial assets have increased just $0.7 billion or 3.5% while liabilities have increased $8.65 billion or 32.2%.

While retirees and, therefore, legislators continue to ignore PERS’ declining financial viability, credit rating agencies do not. Fitch Ratings just downgraded Mississippi’s bond rating outlook from stable to negative in part because of PERS’ growing unfunded liabilities.

After you ask your favorite official about PERS latest financial dilemma, ask them what they propose to do about it.

Increasing revenue through higher contribution rates and better investment earnings were not enough to right the ship. Perhaps something should be done to reduce the ever-growing expenditure side too.

“The fact our pension funding levels are weak and getting weaker, that’s a real issue,” said Lieutenant Governor Tate Reeves. “But heretofore, there has not been the political will to do anything about it.”


Bill Crawford (crawfolk@gmail.com) is a syndicated columnist from Meridian.


… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.

If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.

Click for more info

About Ross Reily

Ross Reily is editor of the Mississippi Business Journal. He is a husband to an amazing wife, dad to 3 crazy kids and 2 dogs. He is also a fan of the Delta State Fighting Okra and the Boston Red Sox.

Leave a Reply

Your email address will not be published. Required fields are marked *