I recently posted about the latest PERS annual report. Last week Kingfish weighed in on Jackson Jambalaya with a great summary and explanation.

Here are some of his observations:

The funding level has fluctuated between 60.4% and 61.8% over the last five years even though the PERS portfolio generated an average rate of return of 9.4% during the same period. A comparison of the funding level and rate of return graphs show that the funding level fell in 2011 and 2012 while the rate of return was 14% and 25% How many times have PERS defenders said the market just needs to come back for PERS to recover? The market did come back but the funding level failed to do so…

The decline in active members worsens the problem as the active payroll shrank in 2018 by 1,695 employees…Unfortunately, the assumed employee payroll growth is 3.5%…

Payments to retirees continued to rise in 2018 as they jumped over $11 million to $2.609 billion….

The deficit between payments and contributions has grown every year since 2000. Remember how PERS defenders howled in 2011 when Governor Barbour created the study commission? The deficit was only $470 million when he sounded the alarm. The deficit has more than doubled in only seven years….

Those are facts.

My Take:

How can there be an assumed annual payroll growth? Surely technological advances is reducing labor needs in government offices the same as in other industries? It takes fewer people to do the same amount of work.

Even if labor needs weren’t shrinking, the state and local government budgets are not expanding to allow for the hiring of new government employees beyond replacing departures. That trend is highly unlikely to change in the next decade.

Perhaps Mississippi could expand government payrolls by expanding Medicaid, but that seems unlikely in the current political climate.

The best case for PERS is a slow implosion. But it’s not the most likely outcome.

The most likely outcome is PERS blows up in connection with the next stock market crash. And the driving force will be bond rating agencies that lend money to governmental entities.