Reeves’ Budget Plan Risky for Teachers and Retirees

State economist Darrin Webb projects state general fund revenues will fall for the third consecutive year. That’s unusual. According to the Northeast Mississippi Daily Journal, declines of just two years in a row “have only occurred four previous times since 1970.”

Jeff Amy with the Associated Press in an excellent analysis of Mississippi’s economy said, “State spending this year is roughly $800 million behind where it would have been if spending had kept pace with inflation since 2010.” He said some of the shortfall comes “from hundreds of millions in tax cuts.”

Lt. Gov. Tate Reeves liked that. “For us to have enacted the largest tax cut in state history and still expect that we’re actually going to collect flat revenue year-over-year,” Reeves told Amy, “I think that says an awful lot about the direction that we’re trying to send our government in being fiscally responsible and fiscally prudent.”

Uh, the historic tax cuts have yet to fully kick in. Nevertheless, Reeves’ comment is bad news for community colleges, schools, universities, and agencies hoping tight budgets will go away.

But, it is terrible news for teachers and state retirees.

No budget growth means no state pay increases for teachers. It’s already hard for many schools to attract and keep good teachers. With no state raises, they won’t, except in better off districts able to increase local property taxes.

For state retirees, no budget growth has a more indirect impact. Flat budgets for colleges, agencies, etc., will cause cuts in public employment. As inflation driven expenses eat into their stagnant budgets, agencies only option will be to cut jobs. That means fewer employees paying into the Public Employees’ Retirement System of Mississippi (PERS) over time.

Why is that bad for retirees?

Last September, PERS board chair Lynn Fitch called a special meeting to look at the long-term health of the retirement system. PERS’ unfunded pension liabilities have hovered around 40% (a funded level of 60%) for several years, drawing negative comments from national credit ratings agencies. In her role as State Treasurer, that is a concern for Fitch.

At the meeting PERS Executive Director Pat Robertson presented a new computer model that could predict future PERS funding levels based on changes in key factors such as investments, number of retirees, and number of public employees. One scenario run at the meeting included above average investment returns, current retirement trends, but a slight 0.25% annual decrease in the number of public employees. The model projected PERS’ unfunded pension liabilities would increase to near 50%.

If Reeves’ fiscal plan is for built-in tax cuts over the next 10 years to keep state spending flat, this scenario will become a reality. Then, any bad investment year(s) or surge in retirees (likely with flat spending) would put PERS and retirees’ pensions in jeopardy.

Note: Few board members publicly express concerns about PERS financial health. But at this meeting the newest member, former State Insurance Commissioner George Dale, spoke up saying he has concerns. Dale spent 11 years in the Moss Point school system before his 32 years as insurance commissioner so he knows how government works. If he has concerns, retirees should pay attention.

This entry was posted in Politics. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s