JACKSON, Miss.—Some members of Mississippi’s Public Employees Retirement System say that a recent legislative analysis has not allayed their fears over potential changes to the system’s annual cost-of-living adjustment, also known as public retirees’ “13th check.”
“I’m still worried about what could happen next year because they could change that,” Mary Porter, a retired public school teacher who lives in Terry, Miss., told the Mississippi Free Press on July 23. “Don’t you think? I mean the Legislature can come in and change the law.”
“If it’s protected, though, how can they go in and change it?” her husband, Rick Porter, a retired baseball coach and media center director for Hinds Community College Utica Campus, asked. “If they can go in and change it, then it’s not protected by law.”
“They can change the law,” Mary countered. “That’s what they do.”
The couple, who are both members of Mississippi’s PERS system, argued the point over bacon and spinach omelets at Brent’s Drugs that morning. Their concerns come on the heels of a legislative session that included efforts, some successful, to make significant changes to PERS.
‘The Law Protects the COLA in Mississippi’
Lt. Gov. Delbert Hosemann said last month that the Ridgeland-based Jones Walker Law Firm analyzed freezing or adjusting the COLA. Many retirees opt to receive the COLA as a once-yearly payment instead of monthly. The yearly lump-sum check is referred to as the “13th check.”
“Jones Walker Law Firm was hired to provide us with information about how the COLA operates in law when others were discussing freezing it,” Hosemann said in a July 8 statement to the Mississippi Free Press. “What we confirmed is exactly what we believe: the law protects the COLA in Mississippi for employees and retirees.”
But even with assurances that the COLA is protected by law, the Porters are not confident that their benefits will continue as predicted.
The Public Employees Retirement System serves more than 330,000 public workers, including education workers; individuals employed by the state government, municipalities and counties; members of the Legislature; and the Mississippi Highway Patrol.
The Mississippi Joint Legislative Budget Committee contracted the firm in February to review and advise the committee regarding the “potential challenges in connection with a freeze or other adjustment to the COLA under PERS,” a contract between the two parties on transparency.ms.gov explains. Records show the committee paid the firm $8,500 for its services.
“I have never veered publicly or privately from our commitment to employee and retiree benefits. I do not and will not support removing or changing the cost of living adjustment for these individuals,” Hosemann said in his statement to the Mississippi Free Press.
PERS Executive Director Ray Higgins said that the analysis confirmed the opinion of the Mississippi Attorney General.
“All retirement benefits paid by the Public Employees’ Retirement System of Mississippi are provided for in state statute and can only be changed by the Legislature,” Higgins said in a statement to the Mississippi Free Press on July 18. “The reported results of the legal analysis provided by the Jones Walker Law Firm seems to align with a 2011 opinion from the Mississippi Attorney General’s Office that employees acquire contractual rights when they join PERS and that such rights cannot be impaired.”
Higgins reiterated that funding is still needed to secure PERS funds.
“That said, the system still requires adequate funding to pay all long-term needs of the plan, which includes the cost-of-living Adjustment. SB 3231 and the additional appropriation given by the Legislature this past session seem to be a short-term solution,” Higgins said in the statement. “Although a small step in the right direction monetarily, eventually the System will need funding more consistent with actuarial recommendations, and we should work together throughout the year for the betterment of PERS.”
‘The 13th Check’
The Porters both take their COLA as the once yearly lump sum. Lawmakers have discussed making changes to the annual 3% cost-of-living-adjustment to relieve the financial stress on the system. House Speaker Jason White, R-West, questioned Higgins during the Joint Legislative Budget Committee Meeting about the impact of eliminating the COLA on Sept. 29, 2023.
“Y’all did look at, for new hires, potentially a no guaranteed cost of living adjustment,” White said. “… That would indicate that someone looking at the system has said this is where we are getting out of line. It’s in this particular benefit.”
Senate President Pro Tempore Dean Kirby, R-Pearl, also raised questions about the COLA during the meeting.
“I’ve heard several times that if we pay the 13th check and just not continue the increase—in other words what they got last year is what they would get this year—if we did that for three years, it would solve all our problems,” Kirby said.
“I wouldn’t use the phrase all the problems, but it definitely has a major impact,” Higgins responded.
The Porters said that it is unreasonable to freeze or eliminate the COLA because retirees rely on the yearly increase.
“Those of us who are retired live on a fixed income, and the prices of everything (are) going up—inflation is going up. But our income doesn’t match that,” Rick Porter said.
PERS found itself again embroiled in debate in March of the 2024 legislative session over a proposed bill to place the current PERS board and its structure on the chopping block.
The Mississippi House voted to replace the current Public Employees Retirement System board with a new restructured version. Currently, all members of the PERS board are elected except the state treasurer and a gubernatorial appointee. In the proposed legislation, the board would have increased from 10 to 11 members, but only two members would have been elected—one by retirees and one by current public employees. House Bill 1590—which Rep. Hank Zuber, R-Ocean Springs, authored—passed by the lower chamber in a vote of 85 to 34 on March 13, 2024, but later died on April 2 without a vote in the Senate.
The sitting PERS board released a statement opposing that bill. In the bulleted one-page letter, the board stated the change had “the appearance of an attempt to politicize the PERS Board.”
“The current Board has acted with integrity and dedication in carrying out its statutory/fiduciary duties; in administering the benefits as prescribed in law while following the recommendations of multiple actuaries and other expert advisors; in making recommendations to help the situation; and in providing numerous scenarios at the Legislature’s request,” the statement continued.
At odds were the board’s management of the retirement system’s assets and a decision to increase contributions to the system. The PERS board voted in August 2023 to enact a 2% increase in the employer contribution rate each year until the rate “reaches the amount recommended by the actuary and approved by the Board.” The three-year increase would grow the employer contribution rate from 17.4% to 22.4% with the option to move to 27.4%. The first increase was slated to go into effect on July 1.
PERS Board Member Jay Smith told the Senate Committee on Government Structure on March 20 that the legislative packet provided to the House and Senate included actions lawmakers could take to deal with the annual cost of living distribution. The board recommended that legislators enact legislation that would automatically distribute the adjustment over 12 months.
Those opposed to the measure said the increase would create a financial burden on employers and municipalities.
A “school district employing a teacher earning the current average salary of $53,354 would contribute $10,351 to PERS under a 19.4% contribution rate, up from $9,284 under the current rate of 17.4%,” Mississippi First states on its webpage. “These increases would add up: the first increase to 19.4% is expected to cost the state an additional $60 million in FY25, an amount that does not include additional expenditures for counties and municipalities.”
Maintaining Stability
PERS Executive Director Ray Higgins told SuperTalk host Gerard Gilbert on March 20 that the retirement fund was currently stable and that adjustments were needed to cover projected potential shortfalls.
“This is more of a long-term conversation,” Higgins said. “… Either revenue has to go up as a cost and expenses have to go down or a combination of both. PERS is certainly stable, but in the long term we need additional funding.”
The director said then that the PERS portfolio was more than $33 billion and has remained roughly 60% funded for more than a decade. However, there was also around $25 billion in unfunded liability. He said the issue has compounded over the years.
“In the late ’90s and early 2000s, there were some additional benefits placed in law without additional funding at the time. In the two decades that followed, we had a declining active-to-retiree ratio, meaning fewer actors paid into the system, more retirees coming onto the system, and retirees living longer,” he said. “That’s a good thing but as a cost, we had several economic downturns including the Great Recession, the dot-com bubble … and a little downturn during the pandemic. But certainly (there was) the global financial crisis in the middle there.”
The final Senate bill, which took effect on July 1, rescinded the planned employer contribution increase replacing it with a plan that will increase the rate by 0.5% each fiscal year until Fiscal Year 2029. The bill also made several changes to the PERS system including reducing the decision-making power of the PERS board. The Legislature also appropriated more than $100 million to the system to help with its financial strain.
The Porters say they hope lawmakers truly understand the need to secure PERS funding for all current and future retirees.
“We’re lucky in the fact that we have investments to take up the slack, but there are a lot of people out there who are retired people who are living on fixed incomes that don’t have that to fall back on,” Rick Porter said. “And I worry about those people—about what happens if they freeze it, reduce it, anything. They’re living from paycheck to paycheck now. It takes everything that’s coming in on their retirement to live.
