Political courage required to make changes to PSRS

By Mike Anthony

Mehlville Board of Education member Rich Franz last week called the Public School Retirement System of Missouri, or PSRS, a “Ponzi scheme.”

Mehlville Fire Protection District Board of Directors Chairman Aaron Hilmer last August wrote that the state teacher retirement system “is by definition a Ponzi scheme that needs ever-increasing amounts from new entrants to pay existing members far more money than the fraction they invested.”

Regardless of whether you agree with Franz and Hilmer that PSRS is a Ponzi scheme, we believe they are right about two things: PSRS needs reform and the blame for that reform not occurring lies squarely on the shoulders of our legislators.

We saw that firsthand in February 2011 during a hearing of the Missouri House Retirement Committee on a bill introduced by Rep. Andrew Koenig, R-Winchester, that sought to establish a defined-contribution plan for any new employee who became a PSRS member beginning July 1, 2013. Such membership would have been automatic unless the employee elected to become a member of the existing defined-benefit plan within 12 months of his or her hire date.

The only person to testify in support of the Koenig’s bill was Hilmer. Not surprisingly, those testifying against it were representatives of the retirement system, the Missouri State Teachers Association and the Missouri National Education Association, among others.

Perhaps more disturbing was the fact some members of the House Retirement Committee have strong ties to education as teachers or retired educators.

Needless to say, Koenig’s bill never made it out of committee.

We think reform needs to occur. In his comments, Franz noted PSRS is $5 billion underfunded.

PSRS’s funding ratio — actuarial value of assets divided by actuarial accrued liability — was 85.5 percent, for 2011. In 2010, the funding ratio was 77.7 percent.

The Pension Protection Act of 2006 requires private-sector pension plans less than 100 percent funded to amortize their unfunded liability over seven years. Pension plans in the private sector less than 80 percent funded are deemed “at-risk,” and must make additional contributions to increase their funded ratio.

Political courage will be required to enact the reforms PSRS needs. It’s a shame the majority of our local legislators have given their re-election efforts a higher priority than the job voters elected them to do.