The Mississippi Public Employees’ Retirement System (PERS) is facing a staggering $26 billion shortfall, a problem state officials say stems from legislative choices made more than three decades ago. Decisions from the late 1980s to offer additional retirement benefits without proper funding have now snowballed into a major financial burden for the state.
How It All Began
A 1998 PEER Committee report from the Mississippi Legislature examined the pension system but did not suggest raising funds or hiring extra staff. Despite this, lawmakers went ahead and expanded benefits — without implementing a financial plan to support those commitments.
Currently, PERS serves more than 368,000 members, including current employees, retirees, and former workers yet to retire. Of those, about 267,000 people are actively working or already receiving benefits. Members include teachers, police officers, firefighters, social workers, and sanitation workers — essential personnel whose livelihoods depend on the system’s stability.
According to Ray Higgins, executive director of PERS, the system affects every Mississippian, even those not directly part of it. In June 2024, more than 120,000 retirees were receiving benefits, totaling $3.2 billion in payouts for that year alone.
The Chain Reaction of Unfunded Benefits
Higgins noted that in the late 1990s and early 2000s, lawmakers approved new benefits but did not allocate extra funding. Over the next 20 years, the ratio of active workers to retirees steadily declined. This meant fewer employees paying into the system and more retirees drawing from it — many living longer than expected.
State Senator Daniel Sparks explained that the problem can be traced back to the 1980s, when lawmakers sought to improve compensation for low-paid state workers. However, these decisions lacked sustainable funding. He highlighted that the 3% compounded Cost-of-Living Adjustment (COLA) introduced in 1999 further worsened the issue.
Then came the dot-com crash of the early 2000s and the 2008 global financial crisis, both of which severely impacted PERS investments. These external shocks, combined with earlier policy choices, pushed the system deep into debt.
How PERS Is Funded
PERS operates through a shared contribution model, where employees contribute 9% of their pay, and employers contribute over 18%. However, this setup has proven insufficient to cover the mounting liabilities. Lawmakers are now seeking solutions to prevent the debt from increasing further.
Senator Sparks compared the situation to “buying benefits on a credit card” — the state must eventually pay the bill for promises made decades ago. The legacy of the 1990s continues to haunt Mississippi’s financial future, with a massive payment due in the years ahead.
The Road Ahead
In recent weeks, lawmakers have met with PERS Board members and actuaries to explore realistic strategies for reducing the $26 billion unfunded liability. The goal is to strike a balance between fulfilling obligations to retirees and stabilizing the system for future generations.
