Republican idea for fixing PERS? Let's put our money in mortgage-backed securities!!!

Republicans spent the last election cycle saying that Democrats were engaging in scare tactics regarding PERS and taking pledges not to mess with the 13th check.

Well, guess what?  The Republican assault on PERS has begun. Sen. Joey Fillingane (R-Sumrall) has fired the first shot in the form of SB 2218 filed earlier this week. Here's the "short" title of the bill (full text of the bill is available by clicking the title):

AN ACT TO AMEND SECTION 25-11-103, MISSISSIPPI CODE OF 1972, TO REVISE CERTAIN DEFINITIONS RELATING TO THE LAWS GOVERNING THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM; TO REVISE THE DEFINITION OF THE TERM "BENEFICIARY" TO MAKE IT CLEAR THAT, IN THE EVENT THAT A MEMBER OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM DIES BEFORE RETIREMENT AND THE SPOUSE AND/OR CHILDREN ARE NOT ENTITLED TO A RETIREMENT ALLOWANCE ON THE BASIS THAT THE DECEASED MEMBER DID NOT HAVE THE REQUISITE NUMBER OF YEARS OF SERVICE, THE TYPE OF SERVICE TO WHICH IS REFERRED IS MEMBERSHIP SERVICE; TO REVISE THE DEFINITION OF THE TERM "CHILD" TO CLARIFY THAT A NATURAL CHILD OF A MEMBER OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM IS ONE THAT IS CONCEIVED BEFORE THE DEATH OF THE MEMBER; TO REVISE THE DEFINITION OF THE TERM "EARNED COMPENSATION" TO EXCLUDE FROM EARNED COMPENSATION THE VALUE OF MAINTENANCE FURNISHED AND TO EXCLUDE THE VALUE OF ANY IN-KIND BENEFITS FROM THE COMPUTATION OF EARNED COMPENSATION; TO AMEND SECTION 25-11-109, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT CREDITABLE SERVICE FOR MEMBERS OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM FOR PERIODS OF TIME AFTER JULY 1, 2013, SHALL BE AWARDED IN MONTHLY INCREMENTS; TO PROVIDE THAT THE COMPUTATION OF UNUSED LEAVE FOR CREDITABLE SERVICE FOR MEMBERS WHO RETIRE ON OR AFTER JULY 1, 2013, SHALL BE CALCULATED IN MONTHLY INCREMENTS; TO MAKE IT CLEAR THAT LEAVE CREDIT FOR ELECTED OFFICIALS WHO ARE MEMBERS OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM IS IN LIEU OF, AND NOT IN ADDITION TO, LEAVE EARNED WHILE SIMULTANEOUSLY EMPLOYED IN A NONELECTED POSITION IN THE SYSTEM; TO AMEND SECTION 25-11-113, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT A MEMBER OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM WHO APPLIES FOR A DISABILITY RETIREMENT ALLOWANCE MUST PROVIDE SUFFICIENT OBJECTIVE MEDICAL EVIDENCE IN SUPPORT OF THE CLAIM AND TO DEFINE "OBJECTIVE MEDICAL EVIDENCE"; TO AMEND SECTION 25-11-114, MISSISSIPPI CODE OF 1972, TO MAKE IT CLEAR THAT IF A MEMBER OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM DIES BEFORE BEING QUALIFIED FOR A FULL, UNREDUCED RETIREMENT ALLOWANCE, THE REDUCTION FACTOR FOR THE ANNUITY OF THE SURVIVING SPOUSE SHALL BE BASED ON THE NUMBER OF YEARS THAT WOULD HAVE BEEN REQUIRED FOR THE DECEASED MEMBER TO QUALIFY FOR A FULL, UNREDUCED RETIREMENT ALLOWANCE; TO MAKE IT CLEAR THAT IN ORDER FOR BENEFITS FOR A DEATH OR DISABILITY THAT OCCURS IN THE PERFORMANCE OF DUTY TO BE PAYABLE, THE DEATH OR
DISABILITY MUST HAVE BEEN AS A DIRECT RESULT OF A PHYSICAL INJURY SUSTAINED FROM AN ACCIDENT OR A TRAUMATIC EVENT CAUSED BY EXTERNAL VIOLENCE OR PHYSICAL FORCE OCCURRING IN THE PERFORMANCE OF DUTY; TO AMEND SECTION 25-11-119, MISSISSIPPI CODE OF 1972, TO AUTHORIZE DISCLOSURE OF CERTAIN CONFIDENTIAL MEMBER INFORMATION TO THE MEMBER'S CURRENT OR FORMER EMPLOYER; TO AMEND SECTION 25-11-121, MISSISSIPPI CODE OF 1972, TO REVISE THE INVESTMENT OPTIONS FOR EXCESS FUNDS OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM TO REFLECT THE CURRENT INVESTMENT ENVIRONMENT; TO AMEND SECTION 25-13-11, MISSISSIPPI CODE OF 1972, TO REVISE THE EARLY RETIREMENT FORMULA FOR THE MISSISSIPPI HIGHWAY SAFETY PATROL RETIREMENT SYSTEM TO PROVIDE THAT THE RETIREMENT ANNUITY SHALL BE REDUCED BY AN ACTUARIALLY DETERMINED PERCENTAGE OR FACTOR, RATHER THAN 3% AS IN CURRENT LAW, FOR EACH YEAR OF AGE BELOW 55 OR FOR EACH YEAR OF SERVICE BELOW 25, WHICHEVER IS THE LESSER; TO AMEND SECTIONS 25-11-111.1, 25-13-11.1 AND 21-29-325, MISSISSIPPI CODE OF 1972, TO AUTHORIZE THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM TO MAKE PAYMENTS OF RETIREMENT BENEFITS TO MEMBERS OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM, THE MISSISSIPPI HIGHWAY SAFETY PATROL RETIREMENT SYSTEM AND THE MUNICIPAL RETIREMENT SYSTEMS IT ADMINISTERS, BY WHATEVER MEANS IT DEEMS MOST APPROPRIATE AND TO AUTHORIZE ALTERNATE MEANS OF PAYMENT IF THE MEMBER OR BENEFICIARY CAN DEMONSTRATE THAT PAYMENT BY THE PRESCRIBED MEANS WILL CAUSE UNDUE HARDSHIP; TO AMEND SECTION 25-9-120, MISSISSIPPI CODE OF 1972, TO EXEMPT ACTUARIAL OR INVESTMENT MANAGEMENT SERVICES CONTRACTS ENTERED INTO BY THE BOARD OF TRUSTEES OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM FROM THE RULES AND REGULATIONS OF THE PERSONAL SERVICE CONTRACT REVIEW BOARD THAT GOVERN SOLICITATION AND SELECTION OF CONTRACTUAL SERVICES PERSONNEL; AND FOR RELATED PURPOSES.

There are provisions in the bill that would change the way leave time is calculated at retirement, make it more difficult to get a disability retirement allowance, and allow the PERS Board to determine how to credit someone's service.  There's other stuff in there as well, and folks will be pouring over this for the next few days to figure out all of the implications of the bill.

My favorite part, though, is the language that would let PERS retirement funds be invested in mortgage-backed securities (see lines 1241-1243).  You may recall mortgage-backed securities as the investment vehicle that nearly ended America in 2008.

Sen. Fillingane's bill was assigned to the Senate Finance Committee, of which he is the chairman.

Haley’s PERS Study Commission (brought to you by Frozen COLA)

During election season, the ready refrain of Governor Barbour and all Republican candidates when asked about the Public Employee Retirement System (“PERS”) was “We’re not going to touch your 13th check.” The Governor’s Study Commission apparently wasn’t listening.

In a report issued this afternoon, the PERS Study Commission called for a freeze on cost of living adjustment (“COLA”) payments. This would mean that current retirees would continue to receive 13th checks but without any inflation adjustment. For public employees contemplating retirement, acceptance of the Governor’s Commission recommendation would mean no 13th check for three years after retirement.

After the three year freeze out, the Commission proposes inflation be tied to the Consumer Price Index rather than the current statutory rate. If the legislature were to accept this proposal it would mean a considerably lower payout for retirees than what they’re currently receiving.

There are other recommendations in the report that merit attention like the defined contribution plan study and the addition of more financiers to the PERS Board but we’ll give our public employees a chance to recover from the initial frozen COLA brain freeze before addressing those.

PERS Study Commission to release recommendations tomorrow

From Gov. Barbour's office today:

Gov. Haley Barbour and PERS Study Commission Chairman George Schloegel will present the recommendations of the PERS Study Commission at 2:15 p.m. Wednesday. The press conference will be in the Governor’s Press Room on the 18th floor of the Sillers Building, 550 High Street.

The press conference will be webcast at www.governorbarbour.com.

Should be interesting....

Sun-Herald to PERS Study Commission: Release your recommendations prior to November 8

The Sun-Herald ran an editorial yesterday calling for the release of the PERS Study Commission's legislative recommendations prior to the November 8 elections.  Here's some of it:

The best defense of the commission, and the easiest way to quiet its critics, is for the governor to direct Mayor Schloegel to immediately release, if not the commission’s detailed findings, at least a summary of its recommendations.

That's pretty strong, coming from Commission head George Schloegel's hometown paper.

Rep. George Flagg's statement on PERS

The following is from Rep. George Flagg's statement to the PERS Study Commission yesterday at the last meeting of the Commission until after the November 8 elections:

The Public Employees Retirement System of Mississippi was created in 1952 to provide retirement security to those who spend their careers in public service patrolling our highways, teaching our children, healing our sick, building our infrastructure and keeping our state, counties and municipalities operating smoothly. The services these individuals provide are critical to ensuring that government operates efficiently and, as I’m sure each of you can appreciate, having a strong government infrastructure in place helps attract and retain industry to our state. 

In evaluating and studying PERS, this Commission should keep in mind that the retirement benefit is a part of the overall compensation package provided to public employees and is, in fact, a form of deferred compensation. Public employees are required to participate and contribute 9.0% of their salary for this benefit. They also, as employees, give up salary today for benefits in the future. This benefit, while vital to many, should not be viewed isolation from the rest of the overall compensation package, which works in total to provide the recruitment tool needed for a quality public workforce. 

For more than 60 years, PERS has been providing retirement security to thousands of Mississippians, keeping many off public assistance and providing a certain amount of dignity. Retirees use these payments to purchase goods and services in the communities in which they live impacting the economy in a positive way. 

To that end, this Commission should not recommend:

• Privatizing or changing the current defined plan to a defined contribution plan

• Abolishing the PERS Board of Trustees or changing the make-up of the Board

• Taxpayers representation is currently provided on the Board by the State Treasurer and the Governor’s Appointee

• Reducing or eliminating the Cost of Living Adjustment (13th Check)

• A cost of living adjustment is critical to ensure an individual’s purchasing power keeps up with inflation

Thank you for the opportunity to express my opinions as it relates to this Study Commission and its review of PERS.

Well said.

Gov. Barbour in 2009: Look at cutting PERS benefits

Here's an interesting find from a loyal reader. In his FY2011 Budget Letter, Gov. Haley Barbour said the following:

To ensure pension sustainability, consideration should be given to modifying the current benefit structure, including accrual rates and automatic cost­ of­ living adjustments, for current and prospective state employees.

Still think Republicans won't decimate PERS if they gain control of the House? Mighty big gamble to take there....

A three year history of Mississippi Republicans attacking PERS

• In 2009 the MS House of Representatives passed a Constitutional Amendment to protect PERS from political influence. The Republican leadership voted against the Amendment. The State Senate led by Republican Governor Lt. Gov. Phil Bryant killed the measure.

• In 2010 Republican Representative Steve Palazzo introduced a bill to end the 13th Check as we know it. Democrats killed the bill.

• In early 2010 the Senate Republican Appropriations Committee Chairman wrote legislation that would cut funding completely for PERS if they actually did their job by raising contribution rates enough to cover the future benefits. The bill passed the Republican-led Senate. Democrats killed this harmful measure in the House of Representatives.

• Senate Republicans then wrote a bill to create a PERS Study Commission without any state employees or retirees involved. Senate Democrats tried to amend the proposal to add retirees and state workers. Republicans in the Senate rejected the amendment. Then Democrats killed the harmful legislation in the House of Representatives.

• Republican Governor Haley Barbour created the PERS Commission by Executive Order. He handpicked the chairman, a Republican Mayor. He put his campaign contributors on the Commission.

• On September 22, at a Joint Legislative Budget Hearing, Republican Senator Billy Hewes said that he wanted to change PERS even though the Director of PERS testified that the current system is working and financially sound.

• Lawyers for a Republican think tank presented a secret 13-page legal brief to the Study Commission that argued the state can cut benefits. Several specific ways were mentioned:

1.  Rollback of benefits to levels in 1999 (unless you already have 25 years of service on 7/1/2011.) This is a 5.63% BENEFIT CUT to a retiree with 30 years of service. 

2.  Shift from a guaranteed monthly benefit to a plan where your benefits vary according to the fluctuations in the stock market. 

3.  Raising the amount deducted from your check each month for the PERS contribution (without any increases in benefits). 

4.  Raising the retirement age from 60 to 62 if you don’t have 25 years service before 7/1/2011.

• On October 18, Republican House members issued a press release pledging not to eliminate the 13th check. They avoided any mention of the cost of living adjustment in the check, refusing to pledge not to cut the COLA. They refused to pledge not to abandon a defined benefits plan and move to a stock market based defined contributions plan.

• Republican legislators all over the country are changing the state retirement systems to a defined contribution plan and limiting the COLA adjustments.

A brief note on Republican semantics about PERS

Republicans, justifiably terrified that voters will find out what they intend to do to the Mississippi Public Employees' Retirement System (PERS), are running around telling folks that Democrats are using "scare tactics" to get folks to vote against them.  Well, here's the thing:

Some things in this world are scary. When a guy pulls a gun on you and demands your money, that's scary. When a rattlesnake shakes its tail, that's scary. When Republicans look for ways to give your retirement money over to Wall Street, that's scary.

I can't help but think of President Harry S Truman's famous words as House Republicans complain about Democrats using "scare tactics" when informing the voters about Republican intentions for PERS: "I don't give them Hell. I just tell the truth about them and they think it's Hell."

Well, welcome to Hell, guys. Thank Haley for the ride.

Legislative Republicans say they'll protect PERS and the 13th check; don't be fooled

The PERS support group Honor Your Promise released an email today in response to the Republican statement yesterday that they'll protect the 13th check. In short, the Republicans pledge that they won't make any changes to the yearly PERS cost of living adjustment, commonly referred to as "the 13th check." Well, here's the problem. A bunch of those same Republicans have already voted against protecting PERS.

I'm sure that these Republicans will go against the recommendations of Governor Barbour's Study Commission. I'm absolutely positive. After all, they never do what Gov. Barbour tells them to do, ever. Enough sarcasm. Here's the Honor Your Promise email with the names of the Republicans who voted against protecting PERS once already:

Yesterday several state legislators issued a joint press release pledging not to eliminate the 13th check. However, nineteen of the lawmakers taking the “pledge” actually voted against the PERS system in 2009. A Constitutional Amendment to protect PERS from political influence (HR 31) passed the House of Representatives despite opposition from these lawmakers. The following legislators should explain their flip flop to retirees and PERS members and their families. 

House Republican Leader Rep. Mark Baker (R-Brandon)
Republican Conference Chair Rep. Philip Gunn (R-Clinton)
Republican Floor Leader Rep. Bill Denny (R-Jackson)
Rep. Sid Bondurant (R-Grenada)
Rep. Gary Chism (R-Columbus)
Rep. Ted Mayhall (R-Southaven)
Rep. Scott Bounds (R-Philadelphia)
Rep. Bobby Howell (R-Kilmichael)
Rep. Alex Monsour (R-Vicksburg)
Rep. Rita Martinson (R-Madison)
Rep. Jim Ellington (R-Raymond)
Rep. Greg Snowden (R-Meridian)
Rep. Bobby Shows (R-Ellisville)
Rep. Becky Currie (R-Brookhaven)
Rep. Sam Mims (R-McComb)
Rep. Harvey Fillingane (R-Sumrall)
Rep. Larry Byrd (R-Petal)
Rep. Herb Frierson (R-Poplarville)
Rep. Frank Hamilton (R-Hurley)

 You want to know what's worse?  Rep. Mark Baker, Rep. Philip Gunn, and Rep. Sid Bondurant all have aspirations (Gunn may even have a PAC, more on that to come) to become Speaker of the House should Republicans gain the majority of seats in the House next month.  A House Speaker that's already voted against protecting PERS?  That's not a scare tactic...that's just plain scary.

****PERS UPDATE**** - There's an important update to Monday's highly-read article

Monday's post entitled "Proof that the Republican attack on PERS is from a national playbook to shift PERS management into private hands" has caused a great stir at the Capitol Complex. I have updated that article today to include links to posts covering the bombshell that exploded last night, the legal brief prepared by the Mississippi Center for Public Policy for the PERS Study Commission.

The fallout from this has Republicans at high levels scrambling to respond to what has been a decidedly "un-Barbour" moment for Republicans as they attempt to enter the Phil Bryant era.

But wait, THERE'S MORE! The newly uncovered legal brief also wants to shift PERS management to private hands

I mean, really.  Who saw this coming?

Yesterday, I said that the Republican attack on PERS is nothing more than a political payback scheme designed at a national level to shift management of state pensions to private hands.  So, guess what's in that legal brief from the Mississippi Center for Public Policy?  One of the Mississippi Center for Public Policy's recommended solutions reads as follows:

New employees and all persons hired after July 1, 2007 who have not accrued eight years of time in service can be switched to a defined-contribution plan. (Savings to the State multiply: When each employee manages his own fund, PERS won’t need to employ so many investment managers. PERS added 12 managers over the past ten years to the 17 that were on staff in 2000. Switching to the defined-contribution plan would allow most of the 29 investment managers to leave PERS and find work in the private sector – perhaps advising state employees seeking to invest the funds in their retirement accounts. The State would stop paying the high salaries of several public investment managers and would stop contributing to those investment managers’ retirements.) - Page 6 (Emphasis added)

So, there you go.  Republicans would have public employees, on their low wages, hire investment analysts to tell them how to invest their money.  Honestly, haven't we done enough to bail out Wall Street?

PERS Study Commission legal brief uncovered; tells Study Commission PERS can be "substantially impaired" if so desired

Wow.

Yeah, Republicans will tell you over and over that they aren't after the 13th check, or really aren't up to anything at all with this whole PERS Study Commission. In fact, it's such a non-issue that legislators shouldn't be able to ask questions of the Study Commission's leader.

Well, guess what made its way into public view, thanks to HonorYourPromise.us?  A legal brief from the Mississippi Center for Public Policy written for the PERS Study Commission that tells the Commission it's perfectly O.K. to "substantially impair" PERS.  What's more? It actually tells them what the Legislature would need to "find" in order to shield the attack on PERS from judicial scrutiny.  Read it here and weep.

That brief brings to mind three questions:

1. Who paid for the brief? (I bet George Schloegel could tell us, if Gov. Barbour would let him testify.)
2. Who actually wrote the brief? (It just says "GW" at the end, and there's no one with those initials on MCPP's website.)
3. Who is footing the bill over at the Mississippi Center for Public Policy, anyway?

Anyone think for one second that a Republican-led House would do anything other than walk in lock step with the recommendations of Barbour's PERS Study Commission?  If so, I've got some oceanfront property in Panther Burn I'd like to sell you.

Proof that the Republican attack on PERS is from a national playbook to shift PERS management into private hands ***UPDATED 10/12/11***

In an earlier post, I said that Mississippi Republicans were just taking a page out of the national GOP playbook when they began their attack on PERS under the guise of a Study Commission. Their plan, of course, is to ultimately shift management of PERS to private hands so that GOP donors in financial institutions can make a pretty penny off of managing them.  (More on that connection later.)

Here's the proof. I give you articles on Florida, Colorado, Alabama, Tennessee, and Kansas that all mention Republican desires to change public pensions into 401(k)-type plans.  And here's a bonus article from the New York Times article on Utah, Alaska, Colorado, Georgia, Michigan, Ohio, Kentucky, Florida, Kansas, Oklahoma, and Virginia switching to 401(k)-type plans.  For the record, I found all of those in about 20 minutes of Googling around.

***UPDATE 10/12/11*** - A legal brief prepared for the PERS Study Commission has been uncovered. There are two new articles on it here and here.

Rep. George Flaggs to subpoena head of PERS Study Commission

An article by Emily Wagster Pettus details the battle lines being drawn over a new front in the war over PERS, with Lt. Gov. Phil Bryant (R) and Gov. Haley Barbour (R) digging in to prevent an inquiry into the motives of the PERS Study Commission. Rep. George Flaggs (D-Vicksburg) is wanting Gulfport Mayor George Schloegel (R) to appear before the Joint Legislative Budget Committee to answer questions about the funding, objectives, and intentions of the PERS Study Commission. Schloegel is the chairman of the PERS Study Commission, and like all members of the Commission, was appointed by Gov. Barbour.

Last week, Bryant, who chairs the Joint Legislative Budget Committee as Lt. Gov., rejected Rep. Flaggs' request to have Schloegel appear before the Committee. Bryant, who is running for Governor, said that he spoke to Gov. Barbour, who told him that Schloegel should not appear before the Committee because he "is not a state employee, the Commission is not a state agency, state funds are not being used to pay for the activities of the Commission and the Commission’s report will only be recommendations."

That's interesting to me, since People who aren't state employees, don't run state agencies, don't get state funds to operate, and only give recommendations are called before legislative committees all the time. For his part, Rep. Flaggs has said that he will subpoena Schloegel to the Committee. Prepare now for great wailing and gnashing of teeth from Republicans over Flaggs' ability to do so. This is nothing but a smoke screen and a delay tactic by Barbour and Bryant, who are trying to simultaneously shift control of PERS to private hands, all while keeping the public from knowing what they're doing until, oh, say November 9, 2011.

Mississippi Republicans are waging a disinformation campaign about PERS

Republicans, as I mentioned earlier, are terrified of the PERS Study Commission and the effect it could have on their overall electoral success rate this November. So what's their response?

Disinformation.

For instance, some Republicans are lying to you and trying to tell you that they aren't looking to cut the 13th check.  Think I'm kidding about that?  Here's what Sen. Dean Kirby (R-Pearl) was quoted as saying in the Jackson Free Press yesterday:

Sen. Dean Kirby, R-Pearl, a non-voting member of the study commission, said that at the last commission meeting, Chairman George Schloegel said commissioners have no intention of changing anything about the 13th check.

And here's George Schloegel himself:



Do they think people won't check up on what they say?