How is the state’s retirement system performing? Auditor has the facts.

We’ve all seen the headlines of pension plans for state employees around the country in trouble. The COVID-19 recession has only made things more difficult for states that were already struggling. All this raises an important question: how is Mississippi’s pension plan doing compared to other states?

In 2018, I requested a study to answer that question. The organization I asked for help, the Pew Charitable Trusts, is one of the world’s leading non-partisan organizations for improving public policy. The goal was simple: use the statistical model developed jointly by Pew and Harvard researchers to determine how healthy the Public Employees’ Retirement System of Mississippi (PERS) is. As a former employee of the Pew Center on the States, I know the quality of their work is outstanding. They have performed this study for the state free of charge, and I am thankful for their efforts.

Before discussing the results, I will admit that I have a favorite PERS beneficiary in Mississippi: my mother. She taught for 35 years in Mississippi public schools, on her feet, every day. When she took that job, the state made a promise to her—the promise of her PERS pension.

Now that I am state auditor, I have a responsibility to show both my mother and every other PERS beneficiary if the PERS system is on solid financial footing or not. Shedding light on the facts is the part the auditor plays in helping the state keep its promise to her.

Here is what Pew found:

▪ As of 2018, Mississippi ranked 39^th among all states when it comes to the “funded ratio” of our pension. The funded ratio is the pension’s assets over its liabilities.

▪Mississippi ranks 42^nd among states when it comes to the ratio of our operating cash flow to our assets. Unfortunately, that ratio has deteriorated over the last 20 years.

▪ PERS’ investments are underperforming their projections. Previously, PERS has projected that their investments will yield a 7.75% to 8% return. Over the last 20 years, though, the returns are actually 6.5%.

▪ PERS’ investments have underperformed the S&P 500 since 2010. The performance of PERS’ investments during that time has been in the top quartile of states, though.·

▪ Mississippi ranks near the median for percentage of fees paid to financial advisors.

▪ Over the next 20 years, if the state increases the employer contributions as a percentage of revenue to around 12%, the financial stability of PERS will improve over time.

This represents a taste of the conclusions of the report. To read the full report, you can visit www.osa.ms.gov or find us on Facebook and Twitter.

One thing you’ll see on the full version of the report is a place where Pew simulated another recession (what they call an “asset shock scenario”) and looked to see how well PERS could stand up to it. The result is no surprise. In that scenario, the funded ratio of PERS falls through the floor. Pew also simulated better-than-average economic growth, which of course improves PERS’ position.

I know Mississippians are not afraid to look the facts square in the eye. Mississippians who know me know that I do not shy away from a hard look at the facts, either. And these are the facts. They were gathered by some of the leading thinkers in the world on pensions.

Maintaining the health of PERS is important not only for keeping our promises to our teachers, law enforcement officers, and everyone else in the system, but it’s also important for keeping a good credit rating for the state and being responsible stewards of taxpayer dollars.

My hope is that this overview will provide policymakers and PERS leadership with information that can help them make decisions in the future. I also hope that it provides state employees, pensioners, and taxpayers with transparency into how PERS is performing.

Shad White is the 42^nd state auditor of Mississippi.