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A Local Perspective: Soaring Pension Costs Puts Pressure on Budgets

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As the Mississippi Public Employees’ Retirement System (PERS) Board contemplates recommendations to bolster the state’s struggling pension system, it is important to recognize that soaring retirement costs have far-reaching impacts.

When the PERS Board voted to increase taxpayer funding by raising the “employer contribution rate” five percentage points at a cost of $265 million, most attention was given to state-supported entities (think: agencies, K-12 public schools, community colleges, and public universities).

Yet the total funding required by this rate hike is $345 million, with some $80 million in new financial obligations placed squarely on the shoulders of Mississippi’s cities and counties.  Unless something changes, the new rate (and higher costs) become effective July 1, 2024.

What does this mean for the locals?

Hattiesburg Mayor Toby Barker (Independent) told WLBT that PERS Board action means a more than 28% increase in retirement costs – or $1.5 million – for his city.  Calling the hike “an unfunded mandate,” he noted that this action shifts the burden “from the state down to the local property owners…cities and school districts and counties are going to have to raise property taxes, and they’re going to have to cut services and employees.”

Gautier Mayor Casey Vaughn (Independent) told WLOX the requested PERS increase would cost his city an estimated $306,000, which would “halt future pay increases for all employees and stifle the addition of needed personnel.  That also means the citizens of Gautier would have a large tax increase.”

A WTOK report provided additional context, saying the extra PERS funding “was not something many local leaders were expecting to have to do.  Now they are having to plan and rewrite their budgets.”  Marion Mayor Larry Gill (Independent) said they are “going to sit there and see what we need to cut or see where we need to make adjustments to make sure we are able to fully fund our retirement system.”

Moss Point Mayor Billy Knight (Democrat) says the 5 percent increase adds up to roughly $200,000 in new costs, taking away “from the services we provide to our people because our budget is already strapped, and I can’t emphasize that enough.”

Regardless of political affiliation, there appears to be a consensus among Mississippi’s local officials: this rate hike is bad for local governments and puts enormous pressure on leaders to raise taxes, cut services, or both.

As policymakers evaluate next steps, they should consider Hattiesburg Mayor Barker’s directive: “We need an honest adult conversation about what happens to PERS long term.”

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