The North Pike School District will have to pay an additional $700,000 in employee pension costs because of an increase being imposed by the board of the state’s public employee retirement system, Superintendent Jay Smith recently told the Senate Government Structure Committee.
Smith said he might have to leave vacant teacher posts unfilled to cover the cost.
Officials with governmental entities across the state have voiced similar concerns of possible staff reductions and reductions in services.
Besides being the superintendent of the North Pike School District, Smith, a 33-year career educator, is a member of the Public Employees Retirement System Board. He voted to increase the amount governmental entities contribute to the public pension plan, despite the negative impact the increase might have on his school district
Smith, elected to the board by public education employees, said he and other PERS board members voted for the increase because they take an oath to maintain the financial stability of the program that about 360,000 Mississippians depend on for current or future retirement benefits.
PERS board Chairwoman Kimberly Hanna, chief financial officer and clerk for the city of Tupelo, agreed even though the increase will cost her employer, the city of Tupelo, $2 million a year.
READ MORE: House votes to replace elected PERS board with political appointees
“We have a sworn duty as fiduciaries to make the best decision for the plan, for all members,” Hanna said. “… I have to take that city clerk, CFO hat off when I am at the PERS board meetings and make those difficult decisions sometimes.”
Hanna and other PERS Board members recently were asked to testify before the Senate Government Structure Committee after the House passed legislation to replace the current board of primarily members elected by government employees and retirees with a board of mostly political appointments.
The House legislation also blocks the PERS board from enacting the increase in the amount governmental entities – the state, local governments, school districts and universities and community colleges — pay into the system.
The PERS board has issued a statement opposing the House bill. Senate Government Structure Chair Chris Johnson, R-Hattiesburg, said he has not decided how to handle the House bill in his committee, but said he wanted to hear from PERS board members before making a decision.
Under the current 10-member makeup of the Board, all but two are elected by those in PERS – current employees or retirees. Under the House proposal, all but two members of an 11-member board would be political appointees.
PERS board members told senators during the recent meeting that it is important that the members of PERS have input in who sits on the board that controls many of the issues surrounding their pension.
“The thing that concerns me, not as a board member, but as a taxpaying PERS retiree, is not having direct input on who sits on that board,” said veteran board member Randy McCoy of Tupelo, who served the Tupelo and Clinton school districts as superintendent as well as multiple other posts in education. “If I don’t get to vote for the representative, that is what concerns me.”
Some legislators have complained in the past that the board consists primarily of people elected by PERS members and did not include people who represent governmental entities and the impact that the board’s action could have on the budgets of governmental entities. People who represent government entities might express more concern to the fuller Board in approving large increases in the amount those governmental entities pay into the system.
The current increase approved by the Board is a 5% increase in the paycheck for each employee designated to go toward the retirement system. It will start with a 2% increase in July, followed by another 2% in July 2025 and an additional 1% in July 2026 unless it is blocked by the Legislature as the House bill attempts to do. If and when fully enacted, employers – governmental entities – will pay a total of 23.4% toward the paycheck of their employees for their retirement. Public employees pay 9% of their paycheck toward their retirement.
The increase will cost a cumulative $270 million for all governments in PERS when fully enacted. The largest single share would be the responsibility of the state. And in the past, the state also has paid at least a portion of the cost of retirement for local school districts and community colleges and universities.
Johnson said he is not sure if he is going to take up the House bill or if so how he will amend it. But it is unlikely the Senate will pass the House bill without making major changes.
But he stressed, as did other senators at the meeting, that there would be no effort to reduce benefits for PERS members.
During the meeting, there were references of not dissolving the current board, but instead adding additional members – perhaps members who were selected by the governmental entities.
“I am not sure what we are going to do,” Johnson said. “I wanted to meet with board members to get their perspective. I thought it was a good meeting.”
Johnson said. “We wanted to gather information.”
The board members told senators that they voted to increase the contribution rate for the governmental entities based on recommendations from their paid consultants – primarily actuaries. Board members also pointed out the staff of the Legislature’s watchdog Performance, Evaluation Expenditure Review Committee had recommended the PERS Board make the changes that led to the increased contribution rate for governmental entities.
Still, some senators questioned whether, based on the strong returns that the system has garnered on its investments during the past 15 years, the board overreacted.
The system has assets of about $32 billion and debts of about $25 billion.
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