Steve Wilson at Mississippi Watchdog recently wrote here about how Mississippi’s pension system ranks nationally. From the article:
A new report by nonprofit State Budget Solutions says Mississippi’s Public Employees’ Retirement System of Mississippi is carrying $56 billion in unfunded liabilities, worst in the nation — now at 53 percent of the gross state product in 2013. It covers only 27 percent of the state’s liabilities, which is fifth-worst.
The amount of unfunded liability compared to gross state product is an attempt to make an apples to apples type comparison, since population differences make ranking total unfunded liability not particularly illuminating. 
Mississippi’s fund enjoyed stellar rates of return of 18% in 2014 and 13.4% in 2013. That’s good news.
But to get there, the fund had to heavily invest in stocks as opposed to bond investments that typically support conservative investments programs.
There are people who argue that the world economy is in a liquidity bubble as a result of QE type programs. These people predict that at some point, governments will have to stop pumping money into the economy and that when that happens, the stock market is going to crash again.
Were that to happen, Mississippi’s PERS is going to get massacred if it remains so heavily invested in stocks. And considering the fact that PERS is still way underfunded despite record returns, expect the system to keep chasing high returns in the stock market.
The stock market has lost 50% of its value twice in the last 15 years. Now it’s at all time highs. Yet for the average Joe (like me), the general economy still feels pretty bad. There is a disconnect there that makes many people fearful of the stock market at its current valuations.
What would happen to PERS if there was another 50% drop in the stock market in the next 5 years? The whole thing should be scary for lawmakers, taxpayers and PERS participants.
But don’t expect this to come up when the legislature convenes in January. No elected official wants to be the bearer of bad news when it comes to PERS.