State Treasurer Eric Schmitt warned lawmakers Wednesday that MOSERS — the Missouri State Employees Retirement System — faces a bigger shortfall than many have thought.
"The truth is, if you plug in realistic assumptions — which I'm advocating for — the true nature of the problem is revealed," Schmitt told the News Tribune after appearing before the Legislature's Joint Committee on Public Pensions.
"We have a much bigger problem than anybody ever saw before."
The treasurer, who serves as a member of the MOSERS board, expects to ask the board at this morning's meeting to continue lowering the retirement system's earnings predictions, which Schmitt said have been unrealistically high.
"For years, including during the peak years of the financial crisis, they assumed that our investments would earn more than 8 percent," he told lawmakers. "When everybody else knew that returns would be at historic lows, they kept assuming they'd have one of the highest returns in the nation — that never happened.
"MOSERS has missed its assumptions in 16 of the past 17 years."
Schmitt said a new actuarial report — from a new actuary company — shows the MOSERS pension system is only 60 percent funded, when the industry standard is 80 percent.
"Sixty percent funded means we're facing a crisis," he said. "It means more hard-earned taxpayer dollars will be required to keep the system solvent."
The treasurer said as of June 30, the actuaries said MOSERS' "unfunded liability has surged past $5.2 billion, (which) 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.
"To put that in context, we owe more in pensions than we owe in state bonds."
He said one reading of the new report could show the system is only 50 percent funded, adding: "It means for every dollar that we promised, we only have 50 cents in the bank to pay them."
However, some would argue, a retirement system's obligations don't come due all at once, since people who still are working can't make their claims until years later.
Candace Smith, MOSERS' communications manager and public information officer, said last week: "Unlike in some other states, every year the state of Missouri has appropriated to MOSERS 100 percent of the employer contribution recommended by the system's actuary.
"In turn, MOSERS pays 100 percent of the promised benefits due to members."
Schmitt declined to blame any one person or administration, noting some of the decisions MOSERS' board members made in the 1990s — such as improving benefits — only now are causing problems.
"This isn't a 'red jersey' (Republicans) or 'blue jersey' (Democrats) thing for me," he said. "This is about protecting taxpayers and honoring the promises that we've made to people."
Schmitt also said MOSERS paid nearly four times more for investment fees than the overall industry average, costing "hundreds of millions of dollars in investment fees in recent years."
He added: "Data from Boston College's Center for Retirement Research shows that, (of) 135 public pensions that disclosed investment fees and asset levels MOSERS has the seventh highest investment costs.
"This is unacceptable."
Schmitt told the committee that, for years, MOSERS made liability estimates based on mortality tables from the 1970s, but today's retirees generally live longer than those 40-year-old tables would suggest.
He acknowledged MOSERS recently upgraded that information.
State Sen. Gina Walsh, D-Bellefontaine Neighbors — a member of the joint committee and the MOSERS board — reported the upgrade occurred last year.
Until things are changed, Schmitt said, lawmakers can expect to have to pay more and more each year for the state's share of the retirement system's costs.
"The required rate of contribution has risen yet again, crossing 20 percent for the first time," he said. "For every $100 a state employee earns, we have to put $20 into MOSERS.
"That may not sound like much, but add that up for our tens of thousands of state employees, and you have a situation where MOSERS will be asking for tens of millions of dollars in additional funding this year alone."
Schmitt estimated that will be an additional $15 million-$30 million in next year's budget request.
State Sen. Rob Schaaf, R-St. Joseph, chairs the joint committee.
He told reporters after Wednesday's meeting: "We, as legislators, have to take into account all of the information available to us, and listen to experts, in order to make laws that will do the right thing for the people of Missouri.
"I think people who are MOSERS members need to make themselves heard, and demand that MOSERS and the state Legislature do the right thing to protect their pensions."
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