Missouri's Public Pension System Facing Funding Crisis, Treasurer Says

Sep 13, 2017

JEFFERSON CITY — The public pension system in Missouri is continuing to fail to meet funding projections, a situation State Treasurer Eric Schmitt called a crisis Wednesday.

Schmitt urged a joint committee of lawmakers to address serious structural issues in pension systems that he said could bankrupt the state.

"This crisis is no longer on the horizon. It is at our doorstep," Schmitt said. "This is a conversation that we need to have."

Schmitt said there is a significant funding deficit in the public pension systems that, if not addressed, could cripple funding for schools, roads and other public works.

Part of the deficit, Schmitt said, comes from actuarial estimates on returns on investment that were unrealistic. Estimations on the Missouri State Employee’s Retirement System's return on investment were stated at 8 percent for the last several years, and Schmitt said returns actually came in at closer to 2.2 percent.

MOSERS missed its projected returns 16 out of the last 17 years, Schmitt said. Schmitt said new actuarial estimates put MOSERS at 60 percent funded. A healthy fund should be about 80 percent.

The actuary providing these estimates, and who had worked for the state for more than 15 years was recently terminated.

State Sen. Rob Schaaf, R-St. Joseph, said he was concerned that years of actuarial overestimates were caused by administrative pressure.

"If it’s an administration that is telling them what to do, that implies that the actuaries are doing the bidding of the administration, and not the administration taking the advice of the actuaries," Schaaf said.

By keeping the estimations high, administrations have been able to avoid costly budget cuts to other departments to make up the deficit. But Schmitt said that if structural changes aren’t made, it will mean "more hard earned tax dollars will be required to keep the system solvent."

Those tax dollars would otherwise be available to be spent on education, roads and infrastructure, he said.

"Whoever was driving the train, the fact of the matter is it was on its face ridiculous to assume these unreasonable rates of return," Schmitt said.

Schmitt said that as of June 30, the unfunded liability of MOSERS exceeded $5.2 billion dollars. He said that means "we are thousands of dollars in debt for every single Missouri taxpayer. This liability is the number one liability for our state - a problem that, without action, will only get worse and worse every year."

Schmitt’s address comes after MOSERS released a news release on Sept. 5 that announced a plan to offer buyouts to some terminated state employees not yet eligible to receive retirement funds. About 17,000 Missourians would be eligible for the voluntary program.

The lump-sum buyout would lessen MOSERS overall debt.

Schaaf, chairman of the Joint Committee on Public Employee Retirement, also expressed concern that a need to make changes to the way MOSERS is funded might signal a need to reassess other pension funds statewide.

"If the pipes in the kitchen are wearing out, then the pipes in the bathroom probably are too," Schaaf said.

Supervising editor is Mark Horvit, horvitm@missouri.edu.