Pension administrators don't expect much trouble

Missouri government's retirees shouldn't be upset by reports the costs for funding state employee pensions will increase in the 2017-18 business year, MOSERS Director John Watson said Tuesday.

MOSERS - the Missouri State Employees Retirement System - is asking lawmakers to increase the state's contributions by approximately $47 million, including $28.6 million in general revenue.

The requested increase would make the state's contributions to MOSERS 19.45 percent of the state's $2 billion payroll for approximately 49,000 employees. The state's contributions during the current, 2016-17 business year are 16.97 percent of the payroll.

Still, Watson said MOSERS' request is about 1.45 percent of the total state budget - the same percentage MOSERS had in the 1999 state budget.

"So, over 20 years, our request of the total state budget has been flat and has not grown," he said.

He noted lowered investment income is a national problem.

"The world economy is suffering from the same thing in all the developed countries," Watson said. "After the 2008-09 financial crisis, the recovery has been very slow."

The revenue report for the first five months of the 2016-17 business year showed a general revenue growth of 2.6 percent. However, the budget lawmakers passed last spring and Gov. Jay Nixon signed in June called for 4.1 percent growth.

Nixon scheduled a media availability for 10 a.m. today to discuss the current budget situation.

MOSERS' requested increase will compete with increased budget requests from many other state departments and agencies - and might not be fully funded.

"The reality is any one year would not be dramatic," Watson said. "Retirees would not see any change in the benefits they're receiving right now, (and) the commitments that have been made to active members and so forth would not be impacted."

However, he added, backing off the annual commitment to keeping a pension plan current also can affect a state's bond-rating, which could impact the financial decisions of all governments from the state down to municipalities and school districts.

A recent Fitch ratings service report on bonds being issued for the Fulton State Hospital construction project said: "Missouri maintains a modest long-term liability burden that should remain a low burden on resources."

Missouri has a AAA bond rating from all three ratings services, which it has kept since Warren Hearnes was governor in the late-1960s and early 70s.

In the year ending June 30, the retirement system covered almost 113,400 current and past state employees and paid $783.4 million in benefits.

Scott Simon, director of MPERS, the retirement system for Highway Patrol and Transportation department employees, told the News Tribune on Tuesday his agency doesn't "expect any implications to retirees' benefits as a result of anticipated funding increases."

MPERS projects its current state funding "to be $207 million, up from $200 million one year ago," he said, adding they're projecting a $211 million state contribution in the business year that starts next July 1.

Simon agreed with Watson that retirement plan administrators and lawmakers should keep focused on the long-term perspective, even while dealing with short-term problems.

Both also noted, in the coming decade or two, changes lawmakers made to the pension systems beginning in 2011 will reduce the state's share considerably.

Those changes included requiring employees to wait 10 years to be vested in the system, to work longer before being able to claim benefits, and to contribute 4 percent of their incomes to the plan, instead of the state paying all of the contribution.

Watson noted the predicted savings from those changes for MOSERS was $208 million in the first five years.

"The actual experience has been $497 million in savings, based on 2010 projections," he said.

The Associated Press provided some information used in this story.