Action taken during the 2024 legislative session will not fix the long -term financial issues facing Mississippi’s Public Employee Retirement System, according to a study.
A report released by a legislative watchdog agency cites a study saying “under the approach implemented by the (2024) Legislature, the PERS plan is currently expected to be at a lower funded level in the future than it currently is today.”
The report was done by the PERS governing board’s actuary, which is a private consultant hired by the board to make assumptions on the long-term outlook of the plan.
The study was cited in the recently released annual report of PERS by the Legislature’s watchdog committee, the Performance Evaluation and Expenditure Review Committee.
The PEER report said, based on the actuary study, that the legislative action falls short of fixing the system long-term, “it is imperative that the Legislature and the PERS Board continue to assess the performance of the plan and evaluate the status of the PERS plan in the future.”
The financial issues facing PERS have been an ongoing headache for the Legislature with widespread and long-term ramifications. The system has about 360,000 members including current public employees and former employees and retirees. The system provides pension benefits for most Mississippi public employees on the state and local government levels, including schoolteachers. Members of PERS comprise more than 10% of the state’s population.
The system has assets of about $32 billion, but debt of about $25 billion.
During the 2024 session, legislation was passed to strip a key power of the PERS’ Board – to set the percentage of the employee paycheck governmental entities contribute to the pension program.
To deal with long-term financial issues, the PERS Board had planned a 5% increase over three years to 22.4% that the employers or governmental entities contributed to each paycheck. Governmental entities, particularly local governments and school districts, said to pay for the increase they would be forced to reduce services and lay off employees.
While stripping the power from the PERS Board to set the employer contribution rate, the Legislature also enacted a 2.5% increase over five years instead of the 5% increase over three years planned by the PERS Board.
In addition, the Legislature provided a one-time infusion of $110 million into the system.
Stressing that the numbers were only projections, the report said that stabilizing the system long-term might take a larger contribution than the 5% that the PERS Board planned if additional steps are not taken in coming years.
According to the report cited by PEER, the long-term financial viability could be worse under the legislative plan if lawmakers do not take additional steps.
The study goes on to say the legislative action “does not immediately constitute a problem for the PERS plan; however, careful evaluation of the plan’s future liabilities and funding needs will be necessary to ensure the sustainability of the PERS plan.”
During the 2024 session, some legislators, particularly members of the Senate, had advocated for a larger infusion of money into the system.
Sen. David Blount, D-Jackson, said, “You are moving in the wrong direction and weakening the system” with the bill the Legislature approved. “Is it painful? Is it going to cost more money? Yes, but we need to do it” to fix the system.
But Sen. Daniel Sparks, R-Belmont, and others argued that the debt was “a snapshot” that could be reduced by strong performance from the stock market. The system depends on its investments and contributions from employers and employees as sources of revenue.
The financial woes are the results of a number of factors, officials said, including providing retirees additional benefits in past years and a shrinking public work force.
According to the PEER report, the ratio of active members to retiree members was 1.74 to 1 in fiscal year 2013 and 1.25 to 1 in fiscal year 2023.
“The declining ratio is attributable to a decrease in the number of active members and an increase in the number of retiree members over the period,” the report concluded.
The average annual benefit is $26,909.
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