Missouri’s state budget has taken center stage recently as state leaders work to balance priorities in light of a lagging economy. While I believe it is the right approach to address immediate concerns first, it’s important to remember that our state’s pension system continues to be the single greatest threat to our AAA credit rating. If we wish to safeguard Missouri’s long-term fiscal health, pension reform must be part of the conversation.
Our public employee retirement programs are severely underfunded — a fact that too few decision-makers in Jefferson City are willing to discuss. At the end of the most recent fiscal year, the non-judicial portion of the Missouri State Employees’ Retirement System (MOSERS) was only 64 percent funded, and the MoDOT & Patrol Employees’ Retirement System (MPERS) had fallen to 53 percent. Compare that to the retirement system used by Missouri’s counties and cities, which is currently 95 percent funded.
The MOSERS and MPERS figures are sobering, and the situation is even worse than the numbers imply. The rate of return our state currently assumes is significantly above what most financial experts would agree is reasonable. This means that if the tools we use to measure funding levels were adjusted to reality, they would show an even more drastic situation than the one outlined above.
The bottom line is this: Our state has a serious pension problem, and we need to start talking about how it can be fixed before it’s too late. Without reform, this crisis on the horizon will eventually threaten our ability to meet our most basic obligations toward our schools, roads, health services and much more.
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This dilemma did not appear overnight. Reforms were proposed in 2010 when the General Assembly began to notice the potential for long-term insolvency. I voted for those modifications as a state senator, and they were a productive starting point for reforming our system. As Missouri’s chief financial officer, I now have an obligation to ensure that we move beyond the starting point and get serious about permanent solutions. It’s time to restart the pension conversation and examine what can be done to turn our boat around before we hit the rapids.
Funding our retirement system is not only a financial obligation, but a moral one as well. Our state employees do important work, often serving the public for decades working long hours and making less than they could elsewhere. Moreover, we have made a promise to their families, and we should honor that promise by ensuring the money they’ve earned is there for them when they retire.
Pension reform must be a priority for lawmakers moving forward. Our goal as a state should be to fully fund our obligations as they are incurred instead of putting the burden on the backs of our children and grandchildren. Missouri has long been a leader in financial decision-making, and we now have the opportunity to lead the way on pension reform. In doing so, we would avoid having to make more difficult budget decisions down the road.
Eric Schmitt is Missouri state treasurer