CRAWFORD/State retirement is broke
PERS is in trouble again. The PERS board jacked up the employer contribution rate again. And everybody lived happily ever after.
Finally a top state official expressed concerns out loud, the first time since Gov. Haley Barbour called the retirement system “financially unstable” back in 2011.
State Treasurer David McRae showed some political courage when he spoke the truth out loud about PERS funding. He opposed the board’s move to increase employer contributions another 5%. “I have a lot of problems raising it to 22.4%,” he said as reported by Jackson Jambalaya. “It will cost $265 million. Local hospitals and counties will be on the hook. They will have to raise taxes. I don’t know if they can afford to raise property taxes. The problem is we keep raising the employer contribution to where it’s unaffordable for counties.”
He added there “are a plethora of options on the table we need to explore. I think there are others on the Board who agree with me. We’ve kicked this can down the road.”
No surprise, the PERS board ignored McRae.
Few elected politicians have been willing to speak such truth publicly, including McRae’s predecessors as treasurer, now Attorney General Lynn Fitch and now Gov. Tate Reeves. The State Treasurer serves as an ex officio voting member of the PERS board and has a duty to address financial issues impacting the state.
Each time the Board has increased rates, its professional advisors have claimed the increase would get PERS in good financial shape. Each previous time it did not.
Each time, too, solving PERS’ big problem got harder as gaps got bigger.
The funding shortfall kept growing: PERS’ actuarial funding shortfall in 2011 was $12.3 billion with funding ratio of 62.2%. In 2022 after three rate hikes the shortfall was $20.6 billion with a funding ratio of 59.9%.
The gap between those paying in and those drawing out kept growing: In 2011 a total of 161,676 employees were paying into the system while 83,115 retirees were drawing out. By 2022 a lower total 144,416 were paying in with much higher total of 114,462 drawing out.
Meanwhile, employer contributions went from $723.8 million in 2011 to $1.2 billion in 2022.
The data shows PERS has been structurally unsound for years. Yet the professional accountants and actuaries who assess PERS regularly conclude the system is financially sound. They get there by adding caveats like this, “with the presumption that future contributions will be made at the necessary level to ensure adequate funding.”
Then there is this statement. “We believe that the active membership will continue at or around its current population of 144,416 active members over the projected period.” They say that even though membership has dropped every year for the past 10 years.
Good to see David McRae questioning such nonsense.
“When you tell the truth, justice is done” – Proverbs 12:17.
Crawford is a syndicated columnist from Jackson. He was a member of Gov. Haley Barbour’s PERS Study Committee in 2011.