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It will cost an additional $99.6 million to fund the Mississippi Public Employees Retirement system starting with the fiscal year beginning July 1, 2019.
The PERS Board has voted to increase the employer contribution from 15.75 percent of payroll to 17.40 percent of payroll to help ensure the long-term stability of the program that provides retirement benefits for most state and local governmental employees. The employers that will be footing that extra 1.65 percent will be state agencies, universities, community colleges, public schools and local governmental entities.
The increase approved by the PERS Board will force legislators during the 2019 session, starting in January, to determine whether they can come up with additional funds to help the state agencies, public school districts and universities and community colleges pay for the increased retirement costs for their employees. If legislators do not, those entities will be forced to provide the additional funds within their existing revenue.
Traditionally, the state does not help local governments funds their share of the retirement system.
To fund the increase, minus the local government’s share, would cost about $76 million — $18.1 million for state agencies, $15.9 million for universities, $37.4 million for kindergarten through 12th grade and $4.9 million for community colleges.
When asked if legislators would provide the additional funds during the 2019 session for state agencies and education entities, House Appropriations Chair John Read, R-Gautier, said, “That issue will come to the Legislature. At this time, we don’t know which way it will go.”
Theoretically, the Legislature could provide the total amount of needed revenue, a portion of it or none of it. But regardless, the governmental entities are still mandated by state law to provide the amount of money deemed necessary by the PERS Board to ensure the financial stability of the program, according to Pat Robertson, the outgoing executive director of PERS.
The extra money needed for the retirement system comes at a time when the Legislature has been grappling with funding for state agencies and education entities. The budgets of many agencies have been cut or underfunded in recent years.
In addition to what the government entities contribute to the program, each employee must pay 9 percent of their salary toward their retirement benefits.
Under state law, the PERS Board, which consists of elected officials, such as the state treasurer and members elected by employees, can increase the amount the governmental entities must contribute to the retirement program. But to raise the employee contribution requires action by the Legislature. In addition, there are court rulings and opinions by the office of the Attorney General indicating that legislators might be limited in their ability to increase the employee contribution without also providing additional benefits to the employees.
There are nearly 325,000 people in the PERS system, including current employees, retirees and other employees who used to work in the public sector but no longer do. The program has total assets of $26.5 billion.
The issue has been that PERS’ is funded at 61 percent of full funding, based on the latest numbers. That means that it has 61 percent of the assets needed to pay the benefits of all the people in the system, ranging from the newest hires to those already retired. It is about $17 million short of full funding.
Robertson stressed the program is financially stable, but the goal of the PERS Board is to become fully funded by 2047.