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Joint legislative report raises points of contention

The Legislature 2011 Session

Panel wants employee incentives reviewed, two PERS board seats eliminated and legislative power over retirement fund’s administrative spending.

A new joint legislative report suggests several state agencies study whether the state can — or should — sweeten incentives used to attract and retain workers.

The Joint Legislative Committee on Performance Evaluation and Expenditure Review, or PEER, says the state needs to examine its employee benefit offerings “in preparation for an uncertain future.”

With the emphasis on uncertainties ahead, the report urges a close look at what employee benefits are essential to hiring and keeping a quality government workforce and deserve protecting “should economic conditions require significant future changes in the retirement system.”

The joint committee chaired by state Sen. Gary Jackson specifically recommended that the State Personnel Board, Department of Finance and Administration and state economist study “the benefits package (including compensation, retirement and leave) used as an incentive to hire and retain a quality government workforce in Mississippi.”

The attorney general and the Public Employees’ Retirement System of Mississippi, which administers the defined benefits plan for around 163,000 active participants, should help the state agencies with their in-depth look at what state employee benefits are worthy of keeping during times of fiscal distress, the PEER committee said.

Further, the departments should look at how state benefits compare to those offered in the private sector and devise ways to help state policymakers “develop a more level playing field,” the PEER report added.

The PEER Committee, created by state law in 1973, has broad power to study and investigate entities funded in whole or in part by public money. The joint committee is composed of seven members of the House of Representatives appointed by the Speaker and seven members of the Senate appointed by the lieutenant governor.

In a pair of other recommendations, the PEER report suggests state government clamp down on the autonomy with which the Public Employees’ Retirement System now operates. Those recommendations address the makeup of the PERS governing board and the independence PERS has on spending decisions.

Responding to the joint committee’s request for a study of employee benefits, PERS said the study should have wider participation. It should include PERS as well as representatives from state agencies, state universities, public schools and community/junior colleges, cities and counties, said Pat Robertson, PERS executive director, in a written response to the PEER report.

It’s especially important that PERS take part in the front end of the effort, Robertson said. “Rather than working in isolation, we suggest that PERS be included as part of the proposed study group.”

This, Robertson said, would “ensure the full impact of any recommendations regarding future modifications of the retirement system are thoroughly vetted.”

Meanwhile, rank-and-file state workers are uneasy about the PEER report’s call for a new look at employee benefits to help the state through fiscal hard times, said Brenda Scott, president of the Mississippi Alliance of State Employees.

“People are not too happy,” she said in an interview last Friday.

Scott said no one is thinking the study group will propose actual enhancements to benefits, considering the specific order handed the group is to recommend what “elements should be protected should economic conditions require significant future changes in the retirement system.”

Scott added she worries that a study group made up of a handful of state agency heads “would push a one-sided point of view” and look to find savings by cutting back on benefits to a state workforce that is the lowest paid in the multi-state region.

Full-time employees under the purview of the Mississippi State Personnel Board earned an average annual salary of $34,259 in 2012, the Personnel Board reported in September. The four adjoining states — Arkansas, Tennessee, Alabama and Louisiana — had a combined average of $40,805. A state-by-state breakdown showed Alabama with the highest average at $42,966, followed by Louisiana, $41,883; Tennessee, $40,527; and Arkansas, $37,844.

Rank-and-file state and local workers as well as tens of thousands of PERS retirees could lose representation on the PERS board of trustees through a PEER committee recommendation to eliminate those spots and replace them with appointees by the governor and lieutenant governor.

The PEER committee theorizes that getting rid of one of the two representatives of state employees and one of the two retiree representatives “would revive public confidence regarding the objectivity of the board.”

PEER recommends preference for the replacement appointments go to individuals with expertise in investments or financial management. Proposals for changing the board first surfaced in the list of recommendation by the PERS Study Commission, a special panel appointed by Gov. Haley Barbour in 2011 and whose suggestions have yet to be embraced to any degree by lawmakers.

Not surprisingly, the PERS board does not think changes to its makeup are needed. Robertson, in her response to the PEER report, noted the report recognizes that PERS is “well organized for oversight of its investment portfolios” and has access to needed investment expertise. “Therefore, it seems inconsistent to suggest a need for one or more individuals who are not members of the (retirement) system and who have expertise in investments or financial management to be appointed to the board.”

PERS, she said, has a veteran chief investment officer and retains an investment consulting firm staffed by experts in investments and financial management. What’s more, Robertson noted, the PERS board has 34 investment management firms to manage the board’s 44 different investment portfolios.

Robertson’s response questioned just how taking away the elected representation of workers and retirees would improve public confidence in the decision making of the PERS board.

“Since the Legislature establishes the benefits structure, and the PERS board administers the benefits as prescribed by law, a structure of checks and balances already exists that should help to ensure public confidence in the objectivity of the decisions made that affect the system,” she said.

In a round of recent interviews, some PERS board members voiced concerns over the push to alter the governing board’s composition.

It’s a bad idea, said Virgil Belue, who as retired superintendent of Clinton public schools has represented retirees on the board for 18 years. “It’s the one thing I’d be 100 percent against. The last thing we need is to have political involvement in appointing members of the board.”

The governor already has a single appointment and the state’s elected treasurer also serves on the 10-member board. The remaining members are elected to staggered six-year terms by constituents such as employees of state, county and city governments, public schools, colleges and retirees.

Belue said he is equally opposed to the governor or Legislature appointing PERS executive director, a post now filled through a vote of the PERS board.

“I don’t want to see any politician appointing an executive director,” he said.

H.S. “Butch” McMillan, elected to the PERS board by state employees in 2009, acknowledged the loud cry to “put more independent people on the board who have investment expertise.” But he also noted board membership already includes three CPAs: Himself, Susan Harris (elected by state employees) and Cecil Hill (elected by employees of the Institutions of Higher Learning).

“The other school of thought is that those on the board should have skin in the game,” said McMillan, executive director of the Mississippi Department of Rehabilitative Services. He said he does not intend to run again when his term expires at the end of 2014.

State Rep. Ray Rogers, who served as vice chair of the joint committee that produced the PEER report, said the panel does not see expanding membership on the PERS board as a viable alternative to eliminating the two elected members. “I don’t think it was discussed,” Rogers said in an interview last Friday.

He said his committee proposed the two non-elected appointees as a way to give “the governor and lieutenant governor more of a say” and to bring more expertise to the board.

Responding to the PEER report proposal to force PERS to seek legislative appropriations each year for administrative expenses that include investment manager fees, Robertson said a 1988 opinion from the Mississippi Attorney General affirmed the authority of the PERS board to decide administrative expenditures. “Legislation passed in 1989 further clarified authorization for payment of PERS’ manager fees as an investment expense rather than as a budgeted, appropriated administrative expense.”

The PEER committee insists, however, that PERS is a state agency and is subject to the budgetary laws of the state as well as to the Legislature’s constitutional authority to make appropriations.


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