Gulfport Mayor and PERS Commission Chairman George Schloegel spoke Wednesday at the Harrison County Republican Club, giving those in attendance a rundown of the work he and fellow Commission members recently undertook at the behest of former Governor Haley Barbour.
Schloegel said the Public Employees’ Retirement System isn’t “completely broken but it needs some attention.”
The PERS Commission Chairman noted, “There’s not as many people in the system coming into the program and people are living longer so we’re paying out more. We’re downsizing government, which is good, but there’s not as many to support the program.”
According to Schloegel, PERS collected around 88 cents for every dollar it distributed in the 1980s. “The rule of thumb,” he added, “is if you can stay around 80 cents you’re doing pretty good. Then the legislature decided that we were doing so well why not add some benefits to retirees.”
The former CEO of Hancock Bank would not say if the Legislature erred, but he did add, “They were betting on the fact that the stock market would always go up. That was a bad bet to make.”
Now PERS collects around 62 cents for every dollar distributed and its unfunded liabilities have risen from $1.9 billion in 1998 to $12 billion in 2011.
Schloegel said, “We would have to shut down all of state government for the next three years to balance it.”
The employer (meaning Mississippi taxpayers) contributed 2% to PERS in 1953; now the employer’s portion sits at 14%. Employees’ contributions to PERS in 1953 was 4%; now employees contribute 9%, something former Governor Barbour fought to raise in recent years seeing the poor road PERS was traveling.
In this vein, the PERS Commission is recommending that the employer (again, taxpayers) and employees each contribute 7.5%.
Schloegel noted that PERS is currently “$483 million in the hole for what we’re paying out versus what we’re taking in.”
As for the much debated and discussed 13th Check, the Chairman says the practice began as a way to offer a cost of living adjustment to retirees, “but the time value of money compounds the interest meaning a person receiving a $363 dollar monthly check could get a 13th check for some $8000” since the Legislature made the practice retroactive. He says this was something the Legislature and many others did not fully comprehend.
PERS paid out some $1.6 billion this year. Of that figure, Schloegel noted the 13th Check is $400 million. He said, “If you give somebody something three consecutive times it becomes an entitlement.”
Schloegel also mentioned that the PERS Commission recommended that there ought to be a regular annual review/audit of PERS as constitutionally outlined. He says this is not currently being done. He further added that the report should be submitted to the State Treasurer or an independent agency for review.
Another recommendation was that PERS should not keep all of its assets in the stock market. Such a practice can be unsafe given the recent volatility.
Schloegel also promoted adding private citizens independent of the outcome of their decisions to the PERS Board. “It would be in the best interest of the taxpayers,” he said.
As for SLRP, the legislature’s own special retirement plan, Schloegel said the benefit accounted for close to $1 million, not a significant expenditure to PERS. But the issue here isn’t the cost necessarily; he noted, it was whether or not it was the right thing to do.
The Chairman closed by acknowledging any solutions would not be easy given the passions the discussion creates, but the effort is indeed worth it. “We didn’t get into this over night and we can’t fix it over night. We can fix it over the next 10 years, gradually, but it’s up to the legislature. The Commission was just a recommending body.”