In the debate over a wood pellet mill that is being built in George County near Lucedale, both sides are missing a key point.

The pro-mill side says Enviva’s $140 million pellet mill and a $60 million loading terminal at the port in Pascagoula will provide more markets for the state’s generous timber resources. The anti-mill side argues from an environmental viewpoint and that the mill would bring a danger to state residents due to increased health risks from emissions and airborne particles.

No one is talking about what the mill will cost taxpayers. Taxpayers statewide, through the Mississippi Development Authority, will be providing $4 million in grant funds, with $1.4 million for a water well and a water tank, while the other $2.5 million is for other infrastructure needs and site work. 

George County will provide $13 million in property tax breaks over the next 10 years. 

The company is expected to hire 90 employees in Lucedale, with 300 loggers and truckers possibly finding work supplying logs to the company. 

All of those incentives, if realized, could add up to $17 million or about $188,888 per job.

The lost revenue will have an effect on George County’s budget over the next decade, especially since counties don’t receive sales tax revenue. According to the most recent audit from April 24, George County received $8,445,185 in property taxes.

Over the last four years, the county has taken in $32,051,659 in property taxes, an average of $8,012,915. Extrapolating this over a decade, the county could be expected to take in about $80 million in property taxes. 

If Enviva realizes all of the property tax breaks, the county will lose 13.9 percent in potential revenue. 

George County property tax receipts

The only winner during the first decade of the deal with Enviva might be the city of Lucedale, which could see a boost in sales tax revenue from the plant. 

According to data from the Mississippi Department of Revenue, the DOR has disbursed $18,386,882 in sales tax revenue to the city from 2010 to 2018. The DOR disburses 18 percent of the state’s 7 percent sales tax to municipalities. In 2017, sales tax revenue ($2,204,988) represented 46.8 percent of the city’s $4.7 million budget.

Enviva is the world’s largest wood pellet producer and produces pellets to fuel overseas power plants. It has seven mills in the Southeast and one of those mills is in Amory, acquired in August 2010.

These wood pellets are made from low-grade wood fiber unsuitable for lumber because of small size, defects, disease or pest infestation; parts of trees that can’t be processed into lumber and chips, sawdust and other residue. The plant will mill, dry and pellet the wood in a press, using natural polymers in the wood called lignin to act as a natural glue.

The $1,500 teacher pay raise could be a net positive for the health of the state’s defined benefit pension system but that would require future earnings forecasts meeting projection targets, according to analysis of data by the Mississippi Center for Public Policy.

The good news is the increased contributions to the Public Employees’ Retirement System of Mississippi could add up to as much as $677 million over the next 30 years. This added revenue will mean more money will be available to pay benefits to retirees and give the plan more to invest.

One problem is the projected benefit payments, which will increase by $878 million over the next 30 years ($29.26 million annually) when compared to the previous projections.

The market value of the plan’s assets could increase as much as $2.9 billion over the next three decades, but that depends on a steady return on the investments of 7.75 percent, an assumption that hasn’t been lowered by the plan’s governing board since 2015.

The catch is the plan’s forward looking projections could be in error, as the plan’s actuaries rely on several generous assumptions that include:

• Income from the plan’s investments, 7.75 percent.
• Price inflation, three percent.
• Salary increases, 3.25 percent.

Using those assumptions above, the original projections have the plan 99.6 percent funded by 2048.

A recent report by PERS actuaries suggests the assumed rate of inflation they use to make future projections should be lowered from 3 percent to 2.75 percent to reflect changes in their forecast prediction models.

The way this number was computed was to use the future-looking projections by the PERS actuaries, which provide guidance for the retirement fund’s governing board as a starting point and other data from the state superintendent’s annual report and the Public Employees’ Retirement System of Mississippi’s comprehensive annual report.

To find the most likely number of Mississippi teachers requires using the extra appropriation needed for the $1,500 raise ($14 million more than the original $58 million) and the formula used by the Mississippi Department of Education to compute the amount. 

When the agency submitted the information to lawmakers, it multiplied the number of teachers listed in MDE computers (31,157) by 1,500 and multiplied the result by 25.05 percent for fringe benefits to arrive the $58 million figure.

Using that data, Mississippi K-12 teachers represent about 25 percent of the 150,867 contributing members to PERS and 63.34 percent of the state’s 60,952 employees in K-12 public education. Using the larger figure, that would add up to about 38,260 teachers.

Multiplying the projected PERS payroll by 25.6 percent and the percentage of the $1,500 raise (3.34 percent) yields larger payroll numbers which affect total contributions to the plan.

The first 10 years of projected benefits data were excluded since the raise’s effects will be minimal on those retiring at that time. 

The best way to calculate the effect on benefit payments is to use the plan’s projections for the first decade and focus on the following 20 years. Multiplying the benefit payments by percentage of PERS members that are teachers (25.6) and the amount of the raise (3.34 percent) gives an idea of how much they would affect this crucial area.

PERS beneficiaries also receive a generous annual cost of living increase, 3 percent, that compounds every year after they reach age 60. 

In addition to the $1,500 raise passed by the legislature last session, teachers also receive small, annual raises once they complete two years of service, according to the pay schedule published by the MDE. Teachers are paid according to their qualifications and years of service. 

In 2018, PERS received $570,807,000 (employees contribute 9 percent of their income to PERS) from state, county and city workers and $1,018,163,000 from their employers (taxpayer contributions will increase in the new fiscal year from 15.75 percent of payroll to 17.4 percent). 

Divide that further and the state’s 60,952 employees in K-12 public education contributed $230,891,431 to PERS in 2018 while the employer contribution to their retirement added up to $411,846,933 for a total of $642,738,364.

The actuary for Mississippi’s defined benefit pension fund recommends the plan make some changes to the economic assumptions it uses to plan for the future.

The report submitted by the actuary of the Mississippi Public Employees Retirement System (PERS) — which serves most state, county and municipal employees — says that the plan’s administrators need to decrease its assumptions for price inflation, wage inflation, and returns on the plan’s investments and increase slightly the forecast for administrative expenses.

The report says the plan needs to reduce its price inflation assumption from 3 percent to 2.75 percent to reflect the recent trends with inflation, as estimated by the chief actuary for the U.S. Social Security Administration and other sources.

With the smaller than predicted inflation, the actuaries also recommended the plan reduce its expected return on plan investments from 7.75 percent to 7.5 percent due to changes predicted by forecast prediction models. The plan’s governing board last decreased the expected rate of return in 2015 to the present figure from 8 percent.

The report also recommends the plan reduce its assumption for wage inflation from 3.25 percent to 3 percent.

The report also says the plan needs to take into account a slight increase in administrative costs from 0.23 percent of payroll to 0.25 percent.

The actuaries also changed the plan’s predictions for the mortality of its participants, with the plan assuming that retirees will enjoy longer post-retirement lifespans.

Changing those assumptions will change predictions for the plan’s finances. The actuaries say in the report that PERS’ $16.9 billion in unfunded liabilities will increase under the new assumptions to $18.415 billion. The funding ratio will also decrease from 61.8 percent to 59.9 percent.

PERS’ bottom line has improved in recent years thanks to increased investment returns, but not enough to completely bring the plan to where it should be.

As of the last comprehensive annual financial report released on December 18, the plan’s funding ratio, which is defined as the share of future obligations covered by current assets, is up to 62.5 percent. In 2001, the plan was 87.5 percent fully funded.

The plan’s investments earned $2.385 billion in investment returns in fiscal 2018, a 9.48 percent rate of return, after earning $3.4 billion or a 14.96 percent rate of return in 2017. 

The plan has earned an average rate of return of 7.84 percent in the last 25 years, just a few ticks above the expectation of 7.75 percent. In six of those years, the rate of return was double or more from expectations.

The market is often rocked by fluctuations. Eight of those years have had returns below expectation and four of those years had the plan’s investments losing ground.

Investment income isn’t enough to fill in the plan’s financial gaps, which have increased over the past decade.

The reason is the increasing number of retirees supported by a shrinking number of contributing employees. Benefit payments added up to $2.6 billion, an increase of 5.3 percent over 2017, as the number of retirees increased from 102,260 to 104,973.

The number of contributing employees dwindled from 152,382 in 2017 to 150,687. The amount of employer (taxpayer) and employee contributions added up to $1.6 billion, about the same as the year before.

With more retirees, the plan’s payments for its cost of living increase or COLA added up to $650 million, a 7.8 increase over last year’s COLA payments of $603 million. 

The PERS board voted last summer to increase the employer (taxpayer) contributions from 15.75 percent of payroll to 17.4 percent. 

The Mississippi Department of Mental Health has the state’s largest workforce according to analysis of appropriations bills signed into law by Gov. Phil Bryant.

The department has 7,112 full-time workers and 600 temporary full-timers, the most by far among state agencies. It represents 25.8 percent of the state’s workforce of 27,610.

The Mississippi Department of Transportation is second, with 3,384 full-time employees and no temporary ones. Its employee roster represents 12.2 percent of the state’s workforce.

The Department of Corrections is third, with 2,685 full-time employees and 474 temporary full-timers. 

Fourth is the Department of Public Safety, which includes state troopers and the state Bureau of Narcotics. The agency employs 1,501 full-time, permanent workers and 90 temporary full-timers.

Fifth is the Department of Human Services, which administers federal welfare programs such as Supplemental Nutrition Assistance Program (SNAP) and Temporary Aid to Needy Families (TANF). This agency has 1,741 full-time workers, with an additional 932 employed in time-limited, full-time positions.

The top five agencies in terms of number of employees represent 59.45 percent of the state’s workforce.

Each appropriation bill lists the number of employees at an agency and the performance goals for the agency in the upcoming fiscal year. 

These performance measures were implemented fully in 2017 after being passed by the legislature in 1994.

Mississippi is mid-pack among its neighbors when the ratio of state employees to citizens in considered. 

According to a February report by the state auditor’s office, Mississippi has 108 citizens per every state employee, worse than only Tennessee (167 citizens per state worker) and Alabama (158 citizens per state worker).

Louisiana has 66 citizens per state worker, while Arkansas is the worst in the region with only 50 citizens for every state employee.

When it comes to shrinking the size of the state workforce, Mississippi has followed the trend of its neighbors. 

Since 2004, the state has shrunk its workforce by more than 5,200, with 4,500 of the reductions coming in the last seven years.

In 2010, Mississippi had 94 workers for every resident. Louisiana had 48 state workers for every citizen, Alabama had 144 state workers per resident and Tennessee had 143 state employees per citizen. Only Arkansas showed only a small improvement, shrinking from 51 state workers per resident in 2010 to 50 in 2017.

According to data from the state’s 2018 comprehensive annual financial report, 20 percent of the state’s workforce is employed by government at some level, a slight decrease from 2008, when 20.3 were paid by taxpayers.

The Mississippi Department of Education admitted a major error last week when it miscalculated the number of teachers eligible for a $1,500 raise passed this session by the legislature.

This isn’t the first time the agency has made a major error, as it has a history of fiscal issues and mismanagement.

MDE said in a news release that it calculated the number of positions based on the Mississippi Student Information System (MSIS) that had only teachers and teacher assistants whose salaries were paid by funds from the Mississippi Adequate Education Program. The agency later discovered additional teachers eligible for the raise who weren’t in the MSIS system as funded by MAEP.

The difference is considerable. The $1,500 raise bill passed by the legislature and signed into law by Gov. Phil Bryant will cost $58 million per year. Giving the additional teachers a $1,500 raise will cost anywhere from $12 million to $14 million in additional spending, which the legislature could fix with a deficit appropriation that wouldn’t require a special session.

Considering the pay given to the state’s superintendent of education and the number of employees at MDE, the mistake looms even larger.

Mississippi Superintendent of Education Carey Wright is the nation’s highest paid leader of a state school system and makes $307,000 per year, which is more than the salaries of Mississippi’s governor ($122,160 per year), lieutenant governor ($60,000) and secretary of state ($90,000) combined. The state superintendent’s salary was set in 2008 and Wright was hired by the state Board of Education in 2013 and.

According to the fiscal 2020 appropriation from the legislature, MDE has 550 employees statewide, with most working at the Jackson headquarters at the old Central High School building. 

The agency will cost taxpayers $181,761,535 in the upcoming fiscal year, which starts July 1.

MDE has been dogged by issues with fiscal management in recent years.

In August 2016, MDE fired three employees who contributed to a $19.1 million shortfall in the federal grant program designed to establish community learning centers for after-school enrichment for low-income communities.

The problem was MDE’s Office of Federal Programs issued 46 grants without accounting for the 65 already receiving the funds under the 21stCentury Community Learning Centers. 

MDE tried to reallocate funds from another federal program that sends money to help children from low-income households meet state standards. They announced in 2017 that the deficit was later reduced to $7.6 million and the funds were later restored to districts that requested.

MDE has also had problems with contracts for information technology and other services from 2014 to 2016 as spotlighted by a report by the state auditor’s office. 

The report accused the agency of circumventing state procurement laws and wasting taxpayer funds with duplicative service contracts, many of which were given to former Wright associates from her time at the Montgomery County (Maryland) school district in suburban Washington, D.C.

A pharmaceutical company that is closing a Mississippi drug plant received money from taxpayers for another facility in the state.

AmerisourceBergen will be shuttering its Cleveland PharMEDium plant, laying off 140 workers, but the Pennsylvania-based company received $1,150,000 from several Mississippi Development Authority programs to move a distribution center to Olive Branch, where the $48 million facility employs 129 workers.

The DeSoto facility received $600,000 from the Development Infrastructure Program, which builds and repairs publicly-owned infrastructure, such as roads, for new and expanding businesses. If AmerisourceBergen were to miss its job creation goals, the company would have to repay the grant. 

Under the DIP program, companies aren’t required to make an investment commitment. 

AmerisourceBergen received $500,000 in grants from the Mississippi ACE Fund, which like the DIP program, can be clawed back if the company doesn’t meet job creation goals. The MDA calls this fund a “deal-closing fund” and this money can be used to relocate equipment, provide employee training or building improvements.

AmerisourceBergen also received $50,000 for training under the Workforce Training Fund in 2017.

AmerisourceBergen is also participating in the Advantage Jobs Incentive Program that provides a rebate of 90 percent of Mississippi payroll taxes withheld to qualified employers for 10 years.

The Cleveland plant was part of a 2015 acquisition by AmerisourceBergen of Illinois-based PharMEDium for $2.575 billion. The transition hasn’t been the smoothest for the parent company.

The company said in a first quarter filing with the U.S. Securities and Exchange Commission that it likely won’t restart production this year at its Memphis PharMEDium facility where it laid off 225 workers in January. 

Both the Memphis and Cleveland plants are compounding facilities that mix drugs in syringes and intravenous bags for sale to hospitals, which see cost savings from not having to do them in-house. 

PharMEDium also has facilities in Dayton, New Jersey and Sugar Land, Texas.

Production at Memphis was suspended by AmerisourceBergen in December 2017 after an inspection by the U.S. Food and Drug Administration found issues with sterility with syringes made at the facility. The company said in its SEC filings it is enacting corrective measures to fix the problem.

The company issued a voluntary recall in December 2017 on some of its products because of a lack of assurance in their sterility. 

The company received a grand jury subpoena from the U.S. Attorney’s Office for the Western District of Tennessee in November 2017 for documents about lab testing of a certain type of syringe made at the facility. 

The Mississippi cultural retail attraction program died in the Mississippi legislature in 2014, when the authorizing law expired without passage of an extension. Despite this end, one last holdout project is still alive and could receive more than $96 million from the program.

The Galleria received its third extension from the Mississippi Development Authority in July that moves the deadline for the start of construction to 2022. That’s nine years after the project was authorized in 2013 and eight years after the program ended.

The Gulf Coast Galleria is being developed by Coast developer Bob Mandal and Rise Partners of Chattanooga — which took over for original partner CBL Properties — at a site located at the junction of Interstates 10 and 110, which connects the primary artery with downtown Biloxi and the beaches at its terminus at U.S. 90.

There is some activity at the site, which has now been cleared. Two car dealerships owned by Mandal face I-10 and the city of D’Iberville has expanded D’Iberville Boulevard, which runs through the heart of the site before crossing I-10.

The project was authorized on December 19, 2013 by the MDA, with a minimum required investment of $50 million and an estimate of a $320 million capital investment by the developers.

The developers received their first extension from the MDA on December 17, 2015 that gave them a 60-day extension. 

The second was on January 11, 2016 that gave the developers until December 19, 2019 to begin construction. 

The latest one was approved by the MDA on July 27, 2018 and it expires on December 19, 2022.

Under the cultural retail attraction program, Mississippi returns 80 percent of the sales tax revenue to the developer until the total reaches 30 percent of construction costs. Each retail project in the program must offer either $1 million worth of state-related art, historic markers or audio-visual equipment, or host space for the MDA for 10 years for tourism promotion purposes.

There are two other projects that are receiving money under the program.

The $113 million DeSoto MidSouth Tourism Project LLC, which built the Tanger Outlets Southaven, has earned $6,972,588 of a possible $33,990,000 as of October 2018.

The Outlets of Mississippi in Pearl could receive up to $24 million on an $80 million investment.

There were other projects covered under the cultural retail attraction project that didn’t pan out, including one on property owned by the Jackson Municipal Airport Authority in Rankin County. It was approved for a rebate of $48.8 million for a $162.5 million investment.

The Mississippi legislature passed Senate Bill 2463 in 2013, expanding the existing sales tax rebate program to include cultural retail attractions. A bill to reauthorize the program died in the 2014 legislative session after the MDA approved more than $150 million in possible rebates.

With several projects still approved for the incentive program, there were several attempts by state Sen. David Blount (D-Jackson) to put the final nail in the cultural retail attraction program’s coffin. 

He filed a bill in 2016 to kill cultural retail projects that weren’t complete by July 1 of that year. It failed in committee. He tried again with an amendment to another bill, which increased the amount of the historic structure tax credit, to accomplish the same task. It passed the Senate, but was eliminated in conference.

The Mississippi legislature passed Senate Bill 2463 in 2013, expanding the existing sales tax rebate program to include “cultural retail attractions.” A bill to reauthorize the program died in the 2014 legislative session after the MDA approved more than $150 million in rebates.

Tying annual increases of K-12 education spending to the price of consumer goods for urban consumers, depending on which measure is used, could become very expensive for taxpayers.

Increasing K-12 education spending commensurate with the 18 percent cumulative rate of inflation suggested by public education advocates would’ve added up to $1.042 billion in additional spending between 2007 and 2017. These figures include federal, state and local revenue.

Synchronizing increases in K-12 spending to the Consumer Price Index from the U.S. Bureau of Labor Statistics (21.9 percent cumulative rate of inflation) would’ve hit taxpayers with $1.228 billion in additional spending during that time.

The Consumer Price Index measures the average change, over time, in prices paid by urban consumers for various goods and services, including food, beverages, health care, insurance, housing, and energy. 

That includes electricity rates and gasoline prices.

Mississippi, according to data from the U.S. Census Bureau, has 51.2 percent of its total population living in rural areas.

The furor over inflation and whether K-12 spending needed to be more closely tied to it came out of a report issued by state Auditor Shad White’s office. 

The report by the auditor’s office showed that the growth in K-12 spending on administrative and other non-classroom costs from 2007 to 2017 outpaced the increase in the amount spent in the classroom. 

According to the report, administrative costs increased 17.67 percent during the decade, while instruction costs increased 10.56 percent.

The amount of money being spent overall (federal, state and local) on K-12 education in Mississippi increased 12.89 percent from 2007, when it was $4.9 billion, to 2017, when it was up to $5.5 billion.

This inflationary data might not be applicable to government spending on K-12 education, except in a few cases. 

According to BLS data, the annual rate of increase for food and beverage prices for urban customers averaged 2.3 percent.

Diesel is needed to fuel school buses and national retail prices, according to data from the U.S. Energy Information Administration, averaged $3.17 per gallon due to five years of prices of $3.80 and higher in the South. 

Diesel prices from 2013 to 2017 decreased from $3.92 to $2.65, a drop of 32.39 percent.

White’s report isn’t the first time that alarms have been sounded over increasing administrative costs. 

The Joint Committee for Performance Evaluation and Expenditure Review (PEER) released a report in 2015 that showed spending from 2005 to 2015 on instruction decreased by 3.2 percent while that spent on administration increased by 13 percent.

According to data from the state’s Legislative Budget Office, federal and state taxpayers have spent about $3.426 billion on average in the last four years for K-12 education, which averages about 16.3 percent of the state’s total budget when all revenues (general fund, special funds and federal funds) are considered.

These figures don’t include local property taxes and other revenue, such as 16th section land lease income.

A report by State Auditor Shad White’s office says that despite decreases in both the number of K-12 students and teachers in the last decade, spending on administration and non-instructional costs grown faster than classroom costs.

Administrative costs have ballooned by 17.67 percent ($822 million to $968 million), while instructional costs have grown in comparison by 10.56 percent, increasing from $2.2 billion in the 2006-2007 school year to $2.4 billion in 2016-2017. 

Administrative costs are defined by the report as including superintendent and district spending, principal and school office costs not related to instruction, operations and maintenance of district offices, non-student transportation, supervision and training of non-instructional staff and information services.

This increase in non-instructional spending has occurred despite a large decline in enrollment in Mississippi’s public schools. There were 494,135 students enrolled in the 2006-2007 school year and that shrunk to 481,428 in 2016-2017, a decrease of 2.5 percent. 

That decline is even more pronounced this school year, as there are now 4.75 percent fewer students enrolled in Mississippi public schools as compared with the 2006-2007 school year.

The number of teachers has also declined 8 percent, going from 34,390 in 2007-2008 to 31,662 in 2016-2017.

According to the report, if the amount of federal, state and local money spent on outside the classroom spending decreased every year at the same rate of the decline in the number of students, Mississippi taxpayers would be spending $358 million less annually on these costs. 

Doing this would’ve increased the percentage of K-12 spending in the classroom from 57 percent to 63 percent of all education spending.

Just keeping these costs the same as 10 years before would’ve meant there’d be $285 million more to spend annually on instruction or teacher pay hikes.

A decade ago, taxpayers spent $10,597 per student in public schools, with $4,608 spent per student outside the classroom. In 2016-2017, that amount was up to $12,390 per student, with $5,411 of that spent on non-classroom expenditures. That represents an increase of $803 per student.

The biggest percentage increase in the outside the classroom spending accounts were administrative staff services (up 113 percent) and information services (103 percent).

One example of this administrative bloat is in the Jackson Public School District. This district has earned an F grade in the Mississippi Department of Education’s annual accountability grades in the last two years, yet the state’s second largest school district has 265 central office employees or 96 per each of the district’s more than 25,000 students. 

DeSoto County, the state’s largest school district with 34,000 students, has a central office with 141 positions or about 241 students per administrator.