Here we go again. PERS is bumping employer contribution rates, again, to try and keep the retirement system actuarially sound. The Associated Press reported it will cost taxpayers an extra $100 million annually to do so.
In 2011, Gov. Haley Barbour established his PERS Study Commission to look for ways to stabilize PERS and keep it solvent. At the time Barbour noted, “In 2001, PERS was financially strong with a funded status of 88 percent; a decade later, the funded status has declined to 64.2 percent, despite large contribution increases by both employees and taxpayers (public employers) in recent years.”
Despite annual comments from PERS leadership, particularly outgoing Executive Director Pat Robertson, that everything was hunky-dory, this new bump in employer contributions reveals either the naivety or the deception of those comments.
PERS is worse off now than seven years ago and heading down hill. The funding level is hovers at 61%, the funding gap has jumped to nearly $17 billion from $12 billion, and the number of retirees drawing out has steadily increased while the number employees paying in has actually decreased. (For a detailed analysis, see the recent Jackson Jambalaya blog on PERS.)
“Some have questioned why Governor Barbour would call for a study of the ‘financial, management, and investment structure of PERS’ when I have repeatedly reported that we are financially sound,” Robertson told retirees immediately after the PERS Study Commission report was issued on Dec. 14, 2011. “Governor Barbour formed the Commission after citing concerns about increases in the employer contribution rate as a percentage of public payroll from 2005 (9.75%) to 2012 (12.93%). These increases were not made lightly or without consideration of their significance. They were made to ensure that PERS remains on sound financial footing and to counteract the effects of downturns in the financial markets that began in 2001 but that hit hardest in 2008 and 2009, a period now being referred to as the Great Recession.”
Well, since then investment returns at PERS have averaged 11.4%, but things have not gotten better.
Later in 2012, as PERS’ funding shortfall continued to grow, Robertson and the board jumped the employer contribution rate to 15.75% effective for 2014 saying that fix would get the funding level up to acceptable levels by 2042.
Oops. Robertson and the board now say that’s not working, so they must jump the employer contribution rate to 17.4% effective for 2019. It’s not investment returns, so something else must be wrong. Perhaps it’s what Barbour and his commission suggested, PERS has fundamental flaws.
Meanwhile, legislative leaders, particularly Lt. Gov. Tate Reeves, have kept their heads buried in the sand on PERS. As State Treasurer, Reeves was a PERS board member from 2003 through 2011, so observed PERS deterioration first hand. Through their inaction, Reeves and his colleagues will see taxpayers hit with an extra $100 million to fund PERS.
Escalating costs to fund a flawed retirement plan are what caused Barbour to create his study commission. If legislative leaders had acted on the commission’s recommendations, PERS would be in better shape and retirees more secure.
Reckon legislators and retirees will fall for this new “fix” too?