It’s no secret that Mississippi public-school teachers earn some of the lowest salaries in the nation. It’s no surprise that more than half of teachers in a recent statewide survey reported financial insecurity and a desire to leave their Mississippi classroom to teach out of state or to enter the private sector. It’s now become the status quo that most Mississippi school districts struggle to hire qualified teachers (MDE classified over two-thirds of districts as “geographic critical shortage areas” in the 2024-2025 school year).
But if a proposed reform to the Public Employees’ Retirement System, also known as PERS, goes through, Mississippi’s critical teacher shortage could get even worse.
The compensation package for Mississippi public school teachers is headlined by an infamously low salary (adjusted for inflation, the current average salary of $53,354 is lower than at any point in the 21st century). But along with more than 100,000 other active public employees, teachers do have access to a particular benefit that, for many, makes a career in the classroom worth it.
Under the current system, in return for contributing 9% of each paycheck to PERS for at least eight years, teachers are guaranteed a lifetime pension upon retirement. PERS created figures showing that a hypothetical 30-year teacher in “Tier 4” (meaning they were hired after June 30, 2011) earning a final salary of $60,000 would receive $34,620 in their first year of retirement. Thanks to a cost-of-living adjustment (known as a COLA, or the “13th check”), that amount grows each year to keep pace with inflation. Ten years into retirement, the annual benefit would be roughly $45,171.
In December, the PERS Board of Trustees recommended that the state legislature move all future PERS members—including teachers—into a new “Tier 5” benefit structure to address fiscal concerns about the sustainability of PERS. Although PERS would not save any money from Tier 5 until at least mid-century, these eventual savings would be made by drastically reducing retirement benefits for anyone hired after June 30, 2025.
A PERS Board consultant, CavMac, has recommended a cut that would reduce the guaranteed first-year retirement benefit for a hypothetical 30-year employee under Tier 5 from $34,620 to $16,455. The recommendation also includes eliminating the guaranteed COLA/13th check. This means that, 10 years into retirement, a Tier 5 retiree’s guaranteed annual benefit is still $16,455. That’s a 64% cut from the equivalent benefit for a Tier 4 retiree ($45,171).
The recommendation calls for Tier 5 to include a supplemental 401(k)-style “defined contribution” plan. Tier 5 employees would contribute 5% of each paycheck, with no employer match, to an individual account where the employee would manage their own investments. Even assuming steady investment returns, this wouldn’t come close to compensating for the massive pension cut. (It’s also worth mentioning that, unlike a traditional pension, employees bear the risk of investments in a defined contribution plan.)
CavMac estimates the defined contribution plan to produce a lump sum of $130,500 upon retirement for the hypothetical 30-year Tier 5 employee (also unlike a traditional pension, defined contribution plans result in a finite lump sum of cash rather than a guaranteed monthly check for life). CavMac suggests the retiree could draw down $11,500 a year from the lump sum to supplement their annual pension of $16,455. That’s still just $27,955 in annual retirement income—and it won’t grow with inflation. In fact, because the lump sum portion would run out roughly 17 years into retirement, the Tier 5 retiree’s income would likely decrease over time.
Assuming the Tier 5 employee lives 20 years into retirement, the cumulative value of their retirement benefits would be $417,913 less than it would be under Tier 4. That is, of course, nearly half a million dollars in savings for PERS. But a 30-year career plus 20 years of retirement means those savings won’t be fully realized until 2075.
Projections from CavMac show that PERS faces a funding shortfall that will be most acute in the 2030s and 2040s—exacerbated by the growing imbalance between the number of active employees (which is shrinking) paying into PERS and the number of retirees receiving checks (which is growing). PERS is requesting additional funding to address this shortfall, and Tier 5 will have no bearing on the extent of that request. PERS Executive Director Ray Higgins said “irrespective of a potential Tier 5, additional funding is needed.”
In other words, Tier 5 will not shore up the retirement system. It will not lower your taxes. Instead, it will likely make it even harder to staff your local public school. At a time when teacher salaries are rapidly losing ground to inflation, a guaranteed pension that keeps up with inflation is one of the few incentives for talented Mississippians to spend a career in the classroom. Slashing that benefit is just one more reason for teachers to find the door.
This MFP Voices essay does not necessarily represent the views of the Mississippi Free Press, its staff or board members. To submit an opinion for the MFP Voices section, send up to 1,200 words and sources fact-checking the included information to voices@mississippifreepress.org. We welcome a wide variety of viewpoints.
