Ms. Public Policy Center argues state can rollback public workers’ retirement benefits

October 16, 2011

Education, Legal Affairs, Politics

A Mississippi-based organization that advocates limited government has weighed in on the Mississippi Public Employee Retirement System solvency issue with a call for rollbacks in retirement benefits for some state workers.

In a legal brief submitted to a study commission created to study possible reform of PERS, the Mississippi Center for Public Policy challenges state Attorney General Jim Hood’s assertion that current benefit levels are legally off limits.

The Center for Public Policy argues the state would be on sound legal footing should it decide to make workers pay more into retirement accounts, raise the retirement age or curtail retirement benefits. Specifically, the center’s brief rejects a February opinion by Hood that any reduction in benefits would require matching increases in benefits elsewhere.

It’s unclear what influence the highly detailed 13-page brief submitted by the center will have on a study commission appointed by Gov. Haley Barbour and due to submit an advisory report on Nov. 15 but determining legal options is part of the panel’s mission.

Barber has not been shy about what he wants: a way to limit the state’s contribution share and elimination of “wrongheaded” policies he said led state legislators to significantly enhance retirement benefits without establishing a way to pay for them.

Enhanced benefits targeted by Barbour include guaranteed annual cost-of-living adjustments for workers through age 55, and compounded thereafter.

Also a decade ago, Mississippi legislators increased from 1.875 percent to 2 percent the rate at which a state employee accumulates pension benefits. So a state worker after the year 2000 could accumulate 20 percent of his salary toward retirement after 10 years.

Barbour’s office claims the tab for these system liability costs hits $3 billion.

The soon-to-depart governor wrote a letter to Jackson’s Clarion-Ledger that the newspaper published Oct. 9. He denied, “public servants are being targeted” and insisted his goal is protect the workers and their future income.

Barbour noted in his letter that when the upgrade in benefits occurred in 2001, PERS had a funded status of 88 percent. Today, that status has dropped to 64.2 percent, he said.

The job of the study commission, which next meets on Oct. 31, is to determine options open to the state in reforming the system that covers about 248,000 employees who work for state government, counties, cities and school districts. One of the panel’s key tasks is to determine the legality of changing current or future benefits. About 88,000 retirees receive approximately $1.6 billion in benefits yearly from the $20 billion PERS fund, state officials say.

Given that the commission has legal issues within its purview, members may give the Mississippi Center for Public Policy’s brief a close read.

That’s why the executive director of the Mississippi Professional Educators, Kelly Riley, has posted the brief on the 10,500-member organization’s web site.

“Obviously the center put some time and energy into that,” said Riley, though she noted the center used “quite a bit of case law from other states.”

While emphasizing she is not an attorney, Riley said rejection of Attorney General Hood’s opinion would constitute a rejection of Mississippi laws.

She said she expects that if Hood, a Democrat, is defeated by a Republican challenger in his re-election bid in November, the new attorney general would follow the same legal interpretation. “Regardless of who is attorney general, he would have to issue an opinion based on Mississippi law,” Riley said. “The job is to uphold the law of the state.”

Hood stated in his official review that forcing workers covered by PERS to cover the costs of the enhanced benefits granted a decade ago would subject them to a substantial new disadvantage and would violate the contract clause of the Mississippi Constitution. He sent the PERS study commission a letter in mid September emphasizing that his earlier opinion “makes it clear that employees acquire contractual rights at the timer the employees join PERS, and that such rights may not be impaired.”

The Center for Public Policy counters that decisions by the U.S. Supreme Court “make room for legislatures to unilaterally modify state contracts that were unilaterally created by statute.”

The Contract Clause, the center said, is not “an absolute prohibition” against a state “impairing contractual obligations.”

While legal views differ, what is not in doubt is that about $500 million more is going out each year from the PERS fund than is coming in. Projections are that the employer share of PERS funding is projected to climb yearly through at least 2015, state officials say.

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