Local entities look for help with PERS increase pending
Oct. 19—Local government is made up of an array of people and professions, but the one thing the majority of government workers have in common in Mississippi is the Public Employees Retirement System, also called PERS.
PERS covers a wide variety of government employees including those working for cities, counties, state agencies, public schools, colleges and universities and more. The system had about 145,000 active members paying into the system and 117,000 retirees receiving benefits in the 2022 fiscal year.
PERS, however, does not have enough money to pay retirement benefits for everyone who pays into the system. A May 2023 report from the Joint Legislative Committee on Performance Evaluation and Expenditure Review, or PEER Committee, showed the program has enough money to pay about 61% of those enrolled as of the 2021 and 2022 fiscal years, whereas recommendations for such retirement programs suggest 80% or more. Projections show the ratio dropping to 48.6% by 2047 if no action is taken, the PEER report said.
One cause of the problem has been the declining number of government employees. While small government is a pillar of the Republican Party, which holds a supermajority in the state House, Senate and all statewide offices, contracting government agencies means fewer employees to pay into the retirement system.
Currently, employees pay 9% of their salary into the PERS system, and employers pay 17.4%. The PERS board, in 2022, passed an increase in what employers pay into the system from 17.4% to 22.4%. The increase, which is expected to be phased in over three years, is expected to put local governments on the line for millions of dollars.
In a Council of Governments meeting on Monday, Meridian City Councilman George Thomas said the first bump up to 19.4%, which is set to go into effect July 1, 2024, will cost more than $1 million. When the full increase is realized at 22.4%, he said, the city's payroll costs will have grown by more than $5 million per year.
"This is a serious, serious problem," he said.
Thomas said the increase is likely to be one of the top legislative priorities for the Mississippi Municipal League, which lobbies on behalf of municipalities throughout the state, heading into the 2024 legislative session. Ahead of the 2024 session, the PERS board is also expected to present a long-term PERS funding solution to the state Legislature for consideration. A direct cash infusion from the state has also been floated as a way to increase the program's funding ratio while alleviating the burden on cities and counties. Any fixes, however, are expected to be in addition to the employer-paid increases.
Thomas said it was his opinion the state needs to get involved and encouraged local officials to share their concerns with the local legislative delegation ahead of the 2024 legislative session.
Marion Mayor Larry Gill said the increase would hit his town hard as well and agreed the state needs to be part of the solution.
Although the increase could result in higher taxes, Meridian and Marion at least have the ability to increase tax revenues to meet the funding mandate, Thomas said. Meridian Community College, he said, does not.
MCC President Thomas Huebner said employees at the college are also part of the PERS system, and the increases to the employer contributions will impact MCC as well. For the college, however, there isn't an option to increase taxes to generate more money, he said, and paying more into employees' retirement means spending less in other areas.
Once in place, the 5% employer contribution increase is expected to cost local entities, including colleges, public school districts and city and county government, $345 million per year statewide, the PEER Committee said in its report.
In an update sent to MML members, Hattiesburg Mayor and MML President Toby Barker said changes to the annual assumed rate of return, which was dropped from 7.55% to 7%, could result in employer contributions going as high as 27%. Such increases will likely force municipalities and counties to increase property taxes or cut services to meet the funding obligation, he said.
Contact Thomas Howard at thoward@themeridianstar.com
