Legislation that strips significant power from the board that governs the state’s public employee pension program has passed both chambers of the Legislature.
Under the legislation set to go to Gov. Tate Reeves during the final days of the 2024 session, the Public Employees Retirement System Board would no longer have the authority to increase the contribution rate levied on governments (both on the state and local level) to help pay for the massive retirement system.
The legislation, which passed both chambers in recent days, was a reaction to the decision by the board to increase by 5% over a three-year period the amount local governments contribute to each employee’s paycheck for their retirement. Under the PERS Board plan, the employer contribution rate would have been increased to 22.4% over three years, starting with a 2% increase on July 1.
The board said the increase was needed to ensure the long-term financial stability of the system that pays retirement benefits for most public employees on the state and local levels, including staff of local school districts and universities and community colleges.
City and county government officials in particular argued that the 5% increase would force them to cut government services and lay off employees.
Under the bill passed by the Legislature there still would be a 2.5% increase over five years — a .5% increase in the employer contribution rate each year for five years.
In addition, legislative leaders said they plan to put another $100 million or more in state tax dollars into the retirement system in the coming days during the appropriations process.
Under current law, the PERS Board can act unilaterally to increase the amount of money governmental entities must contribute to the system. But under the new bill that passed both chambers, the board can only make a recommendation to the Legislature on increasing the employer contribution rate.
The PERS Board also would be required to include an analysis by its actuary and independent actuaries on the reason the increase was needed and the impact the increase would have on governmental entities.
In the 52-member Senate, 14 Democrats voted against the bill. Only one House member voted against the proposal.
Sen. David Blount, D-Jackson, said the bill failed to address the financial issues facing the system. He said a permanent funding stream is needed.
Blount said, “You are moving in the wrong direction and weakening the system” with the bill the Legislature approved. “Is it painful? Is it going to cost more money? Yes, but we need to do it” to fix the system.
The system has assets of about $32 billion, but debt of about $25 billion. But Sen. Daniel Sparks, R-Belmont, and others argued that the debt was “a snapshot” that could be reduced by strong performance from the stock market. The system depends on its investments and contributions from employers and employees as sources of revenue.
The system has about 360,000 members including current public employees and former employees and retirees.
The legislation states that no changes would be made for current members of the system. The legislation does reference looking at possibly changing the system for new employees. But that would be debated in future legislative sessions.
The bill does not include an earlier House proposal to dissolve the PERS Board, which consists primarily of people elected by the members of the system, and replace them with political appointees.
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