MERIDIAN — Did you get a glimpse of Mississippi’s invisible black hole? It briefly appeared over the past year in the Bigger Pie Forum, an Associated Press article by Jeff Amy, and the Jackson Jambalaya blog.
“The Public Employees’ Retirement System of Mississippi is a ticking fiscal time bomb,” headlined the Bigger Pie story.
“Analysis: Public retirement plan pressure won’t end soon,” was the headline on Amy’s article.
“PERS results delayed,” read the headline in Jackson Jambalaya.
Afterward, Mississippi’s political and financial black hole, PERS, disappeared again, until last week when Jackson Jambalaya wrote, “Will PERS need more money?”
PERS’ leadership really wants to keep it invisible until after the November elections, so it delayed release of its usual October evaluation report until December.
No surprise. Politicians in both parties want it to stay invisible, too.
Despite good investment returns recently, things aren’t looking so good for PERS.
Back in April, PERS’ actuary, Cavanaugh Macdonald Consulting LLC, gave the board an ominous investigative report. “The purpose of the investigation was to assess the reasonability of the current PERS economic assumptions and demographic actuarial assumptions,” says the cover letter.
Turns out a number of those assumptions are no longer so reasonable and need to change. And the impact of those changes will not be good.
Remember, PERS recently made two other big changes. It lowered its 30-year projection for future investment returns from 8% to 7.75% to bring that assumption more in line. And it jumped its contribution rate for employers (paid with tax dollars) from 14.75% to 17.4%, saying that extra $100 million in revenue annually would overcome funding shortfalls and the lower projected earnings.
Well, the April actuary recommendations would make PERS do much more:
• Lower projected future investment returns, again, to 7.5%.
• Increase retirement rates, meaning PERS payouts will increase.
• Forecast more younger employees to drop out and withdraw their contributions early, again increasing PERS payouts.
• Increase the rate for future administrative expenses.
Hmmm. More out and less in. That can’t be good.
It’s not, especially with PERS’ existing structural flaw of too many retirees drawing out and too few current employees paying in. The report said that if PERS adopts all of the consultant’s recommended changes, the funded liability ratio would once again drop below 60%.
Worse, PERS’ promise to legislators that the new 17.4% employer funding rate would get PERS to full funding by 2047 will fall far short.
Since the Legislature only gives PERS one option to improve its financial position, i.e., increase employer contributions (paid with tax dollars), PERS may have to up that already-too-high rate, again.
No doubt the PERS board is reluctant to adopt these needed changes, but even more reluctant to make the need for them public during election time.
Another thing to keep quiet. The actuary’s study documented that price inflation has averaged well below PERS’ 3% annual cost-of-living adjustment since 1987 and below 2% since 2007.
Even though many want the PERS black hole to stay invisible, they can’t keep it quiet. There’s that huge sucking sound that comes from hundreds of millions of dollars pulled from taxpayer wallets to keep it afloat.
“For there is nothing hidden that will not be disclosed, and nothing concealed that will not be known or brought out into the open.” (Luke 8:17)
• Bill Crawford is a Republican former state lawmaker from Meridian.