Article Comment 

Haley Barbour: PERS study to protect system solvency, public employees

 

 

Democrats and some in the news media have repeatedly criticized my decision to create a study commission to analyze the long-term solvency of the Public Employees' Retirement System. These attacks are aimed at politicizing a well-guided study commission and waging a fear-mongering campaign to scare state employees and retirees into voting Democrat during the 2011 legislative elections.  

 

The myth promoted by political organizations is that the review of PERS is being done to punish state employees. They say reform is not needed, and claim "public servants are being targeted." One columnist wrote, "Any politician who thinks that going after public employees is good politics will find out differently at the polls." 

 

Rather than "targeting" public employees, the study commission's purpose is protecting them and their future pension income.  

 

Is a review of PERS needed? Consider this: 

 

PERS' own numbers show the system has 64.2 percent of the funds needed to pay its liabilities over 30 years. This is well below the recommended level of 80 percent, yet some pretend PERS is in "far better shape than most states." A recent Pew Center on the States study ranked PERS 37th in terms of funding status. Our ranking is even worse - 94th of 124 public employee plans - according to a survey conducted by Boston College's Center for Retirement Research. 

 

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 in recent years.  

 

The state, or taxpayers', contribution to PERS is 12 percent of payroll now, but this rate will rise to 12.93 percent in January and is projected to increase to 14.35 percent next July. Over the last eight years, the taxpayer share will have been increased by almost half (47 percent). That's unsustainable. 

 

Last year, the Legislature increased employee contributions from 7.25 percent of payroll to 9 percent, an increase of 24 percent and the first increase for employees since 1991.  

 

Despite increases on both taxpayers and employees, the taxpayers' share will go up two more times, totaling nearly 20 percent, within a year.  

 

State employees should be as insulted as taxpayers by anyone who claims that reviewing an under-funded retirement plan is "going after public employees." Clearly, these claims are being driven by politics, not policy. 

 

Whether these political groups recognize it or not, ensuring the long-term solvency of PERS is an obligation that we in leadership positions have, not only to taxpayers but to the tens of thousands of past, current and future employees, like school teachers, local government workers, and those at universities and community colleges.  

 

And, the idea that someone will "take away the 13th check" is silly. The 13th check is simply a choice by a retiree to take a cost-of-living adjustment in a lump sum. It costs no more, and probably less, for PERS to pay the COLA in one 13th check than to make 12 monthly payments.  

 

Finally, the PERS study commission has no authority to change any law or rule about PERS or anything else. Its goal is to give accurate, well-analyzed information to the Legislature and other elected officials, current and future PERS beneficiaries, and the public. It's hard to believe so many people want to distort the facts about a critically important program upon which tens of thousands of families depend.  

 

As governor, I have signed into law several changes to PERS that will be positive yet small steps to help set PERS back on the path of financial prosperity. These changes included increasing the vesting period and retirement age for new employees, passing legislation to curb abuses like "double-dipping," and increasing what state employees pay into the fund from 7.25 percent to 9 percent of payroll. All are steps in the right direction, but these changes alone haven't proven to be enough to protect future pension benefits for all of our current state employees. 

 

If we took the advice of our critics, we'd stick our heads in the sand and hope for the best. But Mississippians didn't elect me to ignore difficult issues like PERS. I have a responsibility to state employees, retirees and taxpayers to make sure the retirement system is solvent and remains viable so benefits can continue to be paid now and in the future.

 

 

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Reader Comments

Article Comment hope commented at 10/10/2011 5:05:00 AM:

Wisconsin union fight is really a 15 state GOP power grab. Public workers, elected officials, unions, or others who one wants to blame did not create today's fiscal crisis.
The 2000-2010 jobless decade,globalization, and a lack of real wage growth for a generation, was sunk by greedy big banks and Wall Street, which is some of what "Occupy Wall Street" is all about.
Governor Barbour's intentions could be good or bad for our public workers. Since the comission's findings won't be made public until after the elections, I'm going to say it will be bad and I'm sticking to it.
It's all about workers rights' being under attack by the Republicans.

 

Article Comment newsjunkie commented at 10/10/2011 9:35:00 PM:

Once again, Mississippi politicians do not get it. They cower to the freeloaders and high rollers, then find ways to stick it to the working people. Then they don't understand why people are upset!

 

Article Comment jackt commented at 10/13/2011 4:26:00 PM:

Instead of looking ONLY at cutting the benefits being paid to present and future retirees, committee members need to look at WHY more and more state employees are retiring at 25 years instead of 30 or 35 years, and thus causing the number of PERS retirees to increase by over 50% the past 10 years. A big part of the reason for the PERS problem is the ongoing salary situation for Mississippi's public employees. Mississippi's public employees are 49th or 50th in salaries, lowest in the country.

To compound the low salary problem, Mississippi State workers get no annual COLA and, based on PERS own figures for average salary, salary increases averaged around 1% per year, while inflation averaged a bit over 3.5% per year. In other words, the purchasing power of the average state employee's paycheck has been steadily declining. Why, you might ask, all this talk about salaries when the topic is PERS....because many seasoned and well-experienced state employees quickly leave state employment upon achieving 25 years of service. They go to work in the private sector for salaries that are 30% to 100% higher. But, when they leave, they not only get a higher paycheck, but they also start collecting that PERS retirement check and the annual PERS COLA, something far better than they ever received as full-time state employees.

Low salaries have multiple bad consequences for the PERS budget and the General budget for the state. Experienced employees often leave at 25 years creating gaps that have to be filled by new hires or much higher-cost contractors, and trying to fill that retiree's vacant position with a qualified replacement is nearly impossible with the low salaries that the state of Mississippi is offering. Because that retiree left for a higher salary outside of state employment, PERS will have to pay retirement check and the COLA for 10 to 20 more years than they would have if that employee had stayed on to work for the state for 30 or 35 years.

This doesn't begin to touch the outrageous cost of professional service contracting that is made necessary by the steady exodus of the state's professional staffers (many tens of millions). Ironically, many of the professionals contracted by the state are PERS retirees. Of course, they are often being paid 50% to 100% more than they were paid while they were state employees. If you doubt this, check into the professional engineering services contracted by MDOT. The companies being contracted by MDOT are filled with retired MDOT engineers.

Here's a question that the committee needs to consider....How much would the state and PERS save if MDOT had paid those engineers a better salary and kept them from retiring from state employment?

 

Article Comment newsjunkie commented at 10/13/2011 9:28:00 PM:

jackt, all that just made too much sense. When they saw that folks were leaving state employment after 25 years and finding greener pastures in retirement, Haley made retirement start at 30 years and cut their pay. He and the legislature don't want the seasoned state employees to stay, but they don't want to pay them when they go, either. And btw, why do politicians get retirement anyway?

 

Article Comment jackt commented at 10/14/2011 1:03:00 AM:

Barbour said he wants to protect the retirement system and its funding. OK, I'll take hime at his word and give him the benefit of the doubt on that. Several things he writes in the article are true and make sense. But other things he says would mean pulling the rug out from under employees who have tolerated extremely low pay for a third of their lives.

For Barbour's appointed commission to be considered as valid, they must consider the impact on PERS of the outrageously low salaries paid to state employees as a big reason that the number of retirees has ballooned over 50% the past 10 years. That big increase in the number of retirees has been a huge source of the strain on the PERS. It's a simple fact that low salaries are motivating many state employees to leave state employment so they can start collecting a decent paycheck for what they do PLUS receive their retirement check and COLA from PERS at the same time. The cost, to Mississippi taxpayers, for keeping those salaries so low is HUGE! Case in point, the State of Mississippi's use of expensive personal service contracting has exploded the past few years. And those contractors don't come cheap. Just ask one of the biggest users of professional service contractors, MDOT. And the state's added cost of inexperienced new hires is far more than just a salary. For some positions, it takes years to become proficient. Many of the young new hires coming in quickly learn that the rare pay increases with the State are ridiculously small and they leave once they realize how bad their prospects for decent pay really are. It's hard enough to hire and retain qualified people with those low salaries. Cutting the one bright spot of the pay equation, the PERS benefits, will make the state's hiring even more difficult than it already is.

As for the politicians, I believe they should be able to contribute and participate in PERS. But their retirement system shouldn't be set up to be so much more lucrative than what average state employees receive. Simply put, it's not right.

 

Article Comment mississippian commented at 11/4/2011 1:02:00 PM:

PERS should stand on its own. Taxpayers should not be placing one cent into the system. State employees can elect to enroll in it or some other type of 401K. But as a taxpayer, state employees are not contributing to my retirement, so why should I contribute to theirs?

 

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