Time for Reform of Mississippi’s Defined Benefit Pension System

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Bigger Pie Forum | Time for Reform of Mississippi’s Defined Benefit Pension System | BPF
 
Reform is desperately needed for Mississippi’s defined benefit pension system.
The Public Employees’ Retirement System of Mississippi — which serves most state, county and municipal employees — now has an unfunded liability of more than $17.6 billion as of June 30, 2019.  Last year, it was $16.9 billion.
An important metric to use in evaluating PERS is the plan’s funding ratio which relates the fund’s liabilities to its assets.  During FY 2019, the ratio shrank from 61.8 percent in 2018 to 60.9 percent.  If this was the dipstick in your car’s engine, it would be indicating the need for a change.
Another metric to use for PERS is how much of the state’s tax revenue it would take to cover the unfunded liability.  The general fund tax revenue for the entire proposed state budget for fiscal year 2021 is $5.85 billion, so it would take 3 years of all the state’s general fund to make whole that liability.  That is a no-go of course, as it leaves no money for all other general fund services but it provides much needed context.  In short, PERS is the elephant in the state capitol that elected officials don’t want to talk about.
It would seem the stock market’s hot streak over the last few years would have boosted PERS’ returns enough to make a big dent in the plan’s unfunded liabilities.  Alas, this is not the case.  In fiscal year 2019 (June 30th), PERS earned $1.701 billion or a 6.64 percent rate of return on the plan’s investments, after earning $2.385 billion or a 9.48 percent rate of return in 2018.  The plan expects an annual rate of return of 7.75 percent, so this year’s returns marked the first time in three years

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