The Public Employees’ Retirement System of Mississippi (PERS) annual cost of living adjustment, otherwise known as the ’13th Check,’ has grown nearly $400 million over the last decade.
At that rate of increase, the 13th Check could exceed $1 billion before the end of the next decade due to the manner in which the benefit is calculated. The COLA is equal to 3% of the annual retirement allowance for each full fiscal year of retirement up to the year in which the retired member reaches age 60 (55 for those who became members of PERS before July 1, 2011), with 3% compounded for each fiscal year thereafter.
Jackson Jambalaya recently provided an analysis of the PERS annual COLA, outlining the year-to-year data from the PERS Comprehensive Annual Financial Reports (CAFR), shown below:
2019: $699,947,000 ($50 million)
2018: $650,465,578 ($47 million)
2017: $603,318,841 ($43 million)
2016: $559,888,063 ($43 million)
2015: $517,283,072 ($41 million)
2014: $476,401,043 ($38 million)
2013: $437,808,691 ($36 million)
2012: $402,514,750 ($33 million)
2011: $368,645,000 ($30 million)
2010: $338,628,000 ($25 million)
2009: $312,471,000 ($31 million)
2008: $281,124,000 ($25 million)
2007: $255,939,000 ($23 million)
2006: $232,710,000 ($22 million)
As JJ states in their analysis, “The funding level has fluctuated around 60% over the last five years despite two employer contribution increases of 300 basis points. The COLA was no small part of the deficit between contributions and payments that grew to $1.2 billion last year.”
Given the trends, the question before Mississippi leaders and taxpayers alike is, “How sustainable is the 13th Check?”
Senate Appropriations Vice Chairman Sen. Brice Wiggins told Y’all Politics this is not an issue unique to Mississippi
“Nationwide, states continue to struggle with how to pay for their obligations to retirees and potential retirees. Mississippi is no exception,” Sen. Wiggins said. “Every year about this time we hear the unfortunate forecasts of being able to meet these obligations while funding other needs.”
Sen. Wiggins expects this discussion will be on the table as Appropriations works through the state budget process this session.
”As a state, we must honor our legal obligations to current and soon-to-be retirees,” Wiggins said. “But, we, and I mean all Mississippians, have to be willing to make hard decisions if we want our state to be financially viable for the future. Due diligence requires us to continue to look at such ways. I suspect these questions will continue to be asked as we enter the appropriations process.”
New State Treasurer David McRae will be delving into this issue, as well, given the impact on Mississippi’s credit rating.
“I look forward to my first meeting as a member of the PERS board next month and helping address this issue,” Treasurer McRae told Y’all Politics. “The health of PERS has perhaps the greatest impact on our state’s credit rating.”