The executive director of Mississippi’s pension system told the Senate Finance Committee that the fund’s investments are earning a much-improved rate of return, but that its overall position is just OK.
Pat Robertson, who will retire as Mississippi Public Employees Retirement System’s executive director in 2018, said the fund was enjoying an estimated 8 percent rate of return so far this year after receiving only a 1.15 percent rate of return in fiscal 2016. The fiscal year ends June 30.
“Right now, I think PERS is OK,” Robertson said. “Are we funded where we need to be? No. It’s a combination of multiple things. One of the biggest hits we took were retroactive benefits put into place in 1999 that cost 10 percent of payroll without a funding mechanism. Then we had the dot-com bust (2001) and the great recession (2008).
“We’ve had a lot of whammies, but we’re on the right track. I still am concerned about the long-term affordability of the plan.”
She was testifying before the committee Tuesday to explain the need for House Bill 1301. The bill would exempt the next PERS executive director and chief investment officer from the state’s salary cap law, which mandates that state employees not earn salaries larger than the governor’s, with a few exceptions.
The bill passed out of the committee on deadline day and is now under consideration by the full Senate.
State Sen. Michael Watson, R-Pascagoula, had some pointed questions for Robertson about PERS’ financial position and rate of return.
“We’re looking at a hopefully larger return (this year),” Robertson said. “We don’t want to have to get into a position where our employee contribution rate (now at 15.75 percent) has to increase to keep us within our funding goals. What you hear or read about is about the sustainability of public pensions.
“From my perspective, it’s not a question of sustainability because as long as the plan sponsor can afford to pay the benefits on a year-by-year basis, even if it’s coming out of current revenue, that’s sustainable.”
Robertson said there would likely be a lot of “pushback” if the plan’s governing board decided to increase the employee contribution rate to as much as 18 percent if the plan’s finances required it to remain solvent.
According to the latest annual actuarial report released in October, PERS — which serves most state, county and municipal employees — had its unfunded liability increase to more than $16.8 billion. It also earned only a minimal rate of return, saw the number of retirees increase by more than 3,000 and suffered a funding ratio drop from 60.4 percent to 60 percent.
The funding ratio is the share of future obligations covered by current assets.
The plan’s unfunded liability — which is the amount the plan is short of being fully funded —went from $15.9 billion in fiscal 2015 to $16.8 billion in fiscal 2016, an increase of 5.2 percent. Over the past decade the plan’s unfunded liability has increased 154 percent.
Demographics are also not favorable to PERS’s viability. The number of retirees receiving benefits has grown 40.6 percent since 2007, with 3,145 new retirees leaving the government workforce in fiscal 2016. The number of employees who contribute to the plan also fell from more than 157,000 in fiscal 2015 to about 154,000 in fiscal 2016.