The Mississippi House has voted to remove the board that currently oversees the state government pension – composed primarily of governmental employees and retirees elected by their peers – and replace it with a board dominated by political appointees.
The legislation also would block the enactment of a 2% increase in the amount governmental bodies contribute toward the retirement system.
The governing board of the Public Employees Retirement System said the extra 2% levied on the paycheck of each employee — to be paid by the governmental entities – is needed to ensure the financial stability of the massive system. PERS provides retirement benefits for most state employees, local governmental employees, and public education employees and university and community college staff.
The legislation, House Bill 1590, is the latest salvo between legislators – particularly the House leadership – and PERS officials.
Various government leaders – including House Speaker Jason White — have complained of the planned increased cost to governments.
The board has announced plans to phase in a 5% increase in the employer contribution rate over a three-year period. There has also been talk of phasing in a 10% increase in the employer contribution rate.
The first 2% increase scheduled to be enacted July 1 would cost the state $60 million, not including the cost for local and county governments. Under current law, the board has the authority to act on its own to increase the employer contribution rate, though the Legislature could change the law as the House is attempting to do with the bill it passed Wednesday.
The bill approved by the House would block the scheduled 2% increase and leave it to the new board to decide the next step in ensuring the system’s financial sustainability, said Rep. Hank Zuber, R-Ocean Springs, chairman of the State Affairs Committee.
City and county officials have told legislators they cannot afford the increase.
PERS impacts well over 10% of the state’s population. It has a membership of more than 350,000 current and former government employees who are receiving or will receive benefits.
The contribution rate for governments on each employee paycheck is currently 17.4%.
Wednesday’s House bill that would halt the 2% increase passed 85-34 with most Democrats voting against it. Supporters pushed to fast-track the measure, getting “immediate release” of it to the Senate, which could vote to send it to the governor this week.
Ray Higgins, director of PERS, earlier told legislators that the retirement system currently has $30 billion in assets to pay retirees, but also has $20 million in debt.
“When it comes down to the long-term sustainability of PERS, we should either fund it, change it, or eventually we may risk it,” Higgins said. “Revenue must increase, expenses and liabilities should decrease, or both.”
On Wednesday, Rep. Omeria Scott, D-Laurel, asked why the bill was trying to repeal a governing board consisting of people who were in the system.
Zuber said, “It is not any one reason. It is just so we can get a new set of eyes to review the whole picture.”
When asked about how the revenue that would be lost from not enacting the 2% increase would be replaced, Zuber said, “That is going to be left up to the new board, obviously.”
Lt. Gov. Delbert Hosemann, who presides over the Senate, has said repeatedly that a priority for the current legislative session is preserving the financial integrity of the retirement system and ensuring the promises made to former and current state employees about benefits are fulfilled.
“I look forward to reading the House bill,” Hosemann said.
Before the session started, White told Higgins: “I think there has been a commitment at least around the coffee pot … that we (legislators) want to fix this long term … For myself, I would say we are not going to just increase it (the amount of government money put into the plan) 5%, 10% and hope it gets better.”
The PERS board has asked the Legislature for an infusion of cash for the system. There is a possibility that money could be pumped into the system later this session. While the board has not given the Legislature a specific amount, sources have said an additional $360 million is needed.
The new board would consist of 11 members: four appointed by the governor, three appointed by the lieutenant governor, as well as the state treasurer, the commissioner of revenue, a member elected by retirees and a member elected by current public employees.
The current PERS Board consists of a gubernatorial appointee, the treasurer, two retirees and two current state employees and a member each representing the county and municipalities, universities, public schools and community colleges. All of the current members with the exception of the treasurer and gubernatorial appointee are elected.
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