Senate proposals that would put more than $1 billion into Mississippi’s government pension system are back in play after being killed by the House earlier this legislative session.
Sen. Daniel Sparks, a Republican from Belmont, has revived six of his dead proposals that would make changes to the state’s Public Employees’ Retirement System by inserting that language in House Bill 4073. The amended bill passed the Senate floor on Tuesday.
The proposed changes would put $1 billion into the state retirement system over 10 years, starting with $500 million this July, and an additional $50 million a year over 10 years for cost-of-living increases.
The retirement system, which covers about 350,000 public employees or retirees and represents about 10% of the state’s population, has unfunded liabilities of about $26 billion.
Last year, to try to shore up the underfunded system, the Legislature created a new plan with fewer benefits for people hired after March 1o of this year. It’s a hybrid of a defined contribution plan, similar to the 401(k) system many private employers offer, and a defined benefit plan, which the state has had for decades.
But opponents of last year’s changes say that many public employees, paid at an average of $50,000 a year, are incentivized to work for the state because of the promise of robust retirement benefits at the end of their years of service. The reduced benefits, they say, could make it harder to attract and retain workers.
Some state Democrats want to get rid of the new “Tier 5” category entirely. While Sparks’ revisions roll back some of the components that would impact new hires, he still believes the new category is necessary.
“There are lots of things I don’t want to do, but we have to run a balanced budget,” he said. “My number one commitment from Day One is to meet our obligations for Tier 1 through Tier 4 and pay them everything they’re owed, but for the next tier we had to be more sensible.”
Most notably, Sparks’ changes would bring down the years of service required to retire with full benefits from 35 to 30 for all state employees hired after March 1 and put $50M in a fund to go toward cost-of-living increases for Tier 5 employees.
While cost-of-living adjustments aren’t guaranteed for state employees that fall into the new bracket of the retirement system — it’s something the Legislature must vote on every year — Sparks said this specific allocation sends a message that it’s a priority for the state.
“We mean what we say,” he said.
The amended bill would also make clear that every state employer shares a portion of the state’s unfunded PERS liabilities, correct a quirk in state law that doesn’t allow state employees to make catch up contributions to Roth retirement plans, and sweeten the pot for retirees who want to return to work.
Currently, people who have retired from state service can return for pay at 25% of their highest four years of service, or they can return part-time for half-pay, all while drawing full benefits. One provision of the bill would also allow people to come back to work at up to 80% of their position’s salary and get insurance benefits.
Only elected officials, K-12 superintendents and administrators at community colleges and universities are excluded.
“We’re losing all this institutional knowledge,” Sparks said. “Through this, they can return to work and we can get their knowledge and mentorship and fill vacancies.”
The House on Friday declined to agree on the bill. That means the chambers negotiate and try to come to agreement before next week’s deadline to keep the legislation alive.
The House’s major PERS proposals are still alive and included in the chamber’s teacher pay raise plan. But Senate leaders say they’re not interested in taking up the House’s bill, so it’s likely to die on the March 26 deadline.
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