MERIDIAN, Miss. —
It’s time for the PERS Board and Executive Director to fess up to the serious problems facing the state retirement system.
It’s time for the Legislature to put politics aside and face up to these problems.
It’s time for us retirees to tune in to reality, take our medicine now, and avoid drastic measures that may be required sooner than later.
The latest PERS actuarial report paints a dim picture. PERS suffered a composite loss of $1.8 billion for the last fiscal year. Unfunded liabilities grew to $14.5 billion. The funded ratio fell to 58 percent. The market value of assets fell 3 percent.
Maybe those numbers don’t mean much. Consider these then.
On June 30, 2007, the actuary showed PERS with $19.7 billion in assets and $26.8 billion in liabilities for a funding shortfall of $7.1 billion. (PERS is supposed to be fully funded.)
On June 30, 2012, the actuary showed PERS with $19.9 billion in assets and $34.4 billion in liabilities for a funding shortfall of $14.5 billion.
So, for the past five years PERS assets held steady will while liabilities jumped 28 percent.
Pay attention. The shortfall more than doubled despite big increases in contributions.
Each year since 2006, PERS has increased the employer contribution rate paid by schools, cities, counties, colleges, universities, state agencies and other entities covered by PERS. The employer rate rose from 9.75 percent to 14.26 percent and will rise to 15.83 percent next year.
In 2011 the employee contribution rate increased to 9 percent.
Each year, PERS told us retirees the increased contributions would close the funding shortfall and, thereby, keep the system financially secure.
That has not happened.
The opposite did. The shortfall kept growing and PERS got less financially secure. This was the fifth straight year that the funded ratio fell and eighth out of the last 10. The financial solvency test performed by the PERS actuary shows increased risk each year.
The time is near, if not at hand, when schools, cities, counties, colleges, universities and the taxpayers who fund them will balk at paying exorbitant rates for retirement. Paying 15.83 percent over a 30-year period — yes, that’s what is expected — is too high for a prudent public retirement plan.
The time is near, if not at hand, when bond rating agencies will call Mississippi’s hand for its ever-increasing unfunded liabilities. They have already voiced concerns.
If either of these events happens, the state may have to take quick action in response. Quick action is not likely to be good for us retirees. Yes, our benefits can be reduced when the state acts to “preserve the solvency of the system.”
A much better course is to make less stressful but effective adjustments now, such as those recommended by the PERS Study Commission.
It’s time.
(Crawford (crawfolk@gmail.com) is a syndicated columnist and state retiree from Meridian.)
Columns
PERS has another bad year
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