(The Center Square) — The governing board of the Public Employees’ Retirement System of Mississippi voted Tuesday to increase the taxpayers’ contribution to the state‘s pension fund and reduce the expected rate of return on the plan’s investments.

The increase from 17.4% to 22.4% of payroll will be phased in over three years. The vote by the 10-member governing board was unanimous, but lawmakers in the upcoming session will have to appropriate the funds.

PERS is the defined benefit retirement plan for most state and local employees, so taxpayers will get hit three ways as municipalities, counties and school districts will also have to contribute more toward their employees’ retirement. In fiscal 2022, taxpayers contributed $1.21 billion to the plan, compared with $969 million in 2014, an increase of nearly 25%.

The employer contribution has been increased seven times in the last 20 years, with the most recent increase coming in 2020. The last time the employee contribution was increased was 2011, when the board approved an increase from 7.25% of payroll to 9%.

Hattiesburg Mayor Toby Barker, a former state representative, said the city will need an extra $2.9 million to handle its share of its employees’ pension costs.

The board also voted to decrease the fund’s expected rate of return on its investments from 7.55% to 7%, with two board members casting nays on the proposal. The board originally voted in 2021 to decrease the expected rate of return, but the plan’s funding policy requires enough excess returns above expectations to decrease that figure.

This year, the plan has earned a return of 7.82% after returns were in the red to the tune of 8.54% last year. This came after PERS’ investments earned a near-record 32.71% in fiscal 2021.

With an increasing number of retirees and their beneficiaries being supported by an ever-decreasing pool of contributing employees, the plan’s funding ratio and unfunded liability have continued to decline. PERS has an unfunded liability of $20.6 billion while the ratio of active members to retirees declined from 1.81:1 in FY 2012 to 1.24:1 in FY 2022, or 31.49%.

The funding ratio has declined in the last 20 years, going from 79% to 61% this past fiscal year. The funding ratio defined as the share of future obligations covered by current assets and is a solid measure for determining the fiscal health of a pension fund.

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