After agreeing over the past two sessions to pump nearly $600 million in extra payments into state teacher pensions, Georgia lawmakers have once again raised questions about the long-term prospects of the retirement system.
"At some point we are going to have to draw a hard line in the sand," said state House Retirement Vice Chairman Tom Kirby, R-Loganville.
But it almost certainly won’t be during the 2018 legislative session, which will be followed by primary season.
Gloom-and-doom scenarios for the pension system have long been floated — scaring teachers and retirees. But as the House Retirement Committee recently began hearing a bill to limit cost-of-living raises to pensioners, the chairman made it clear the measure wouldn't go anywhere.
House Retirement Chairman Paul Battles, R-Cartersville, who is leaving the Legislature after this year, noted that his wife is in the Teachers Retirement System. She warned him not to mess with it.
“And I have to go home,” Battles said to an audience that included teacher and school lobbyists.
The fact is, many lawmakers who say they want to make changes to the more than $70 billion TRS — possibly converting it to a 401(k)-type fund for new teachers who are hired — have friends or relatives paying into the system or receiving a pension from either the TRS or its companion, the Employees Retirement System for state workers.
And teacher and retiree groups flooded lawmakers with calls and emails opposing House Bill 903, a proposal by state Rep. Howard Maxwell, R-Dallas, a former Retirement Committee chairman who, like Battles, is retiring.
While acknowledging that slowing the 3 percent cost-of-living raises to retirees wouldn’t dramatically improve the system’s bottom line, Maxwell said lawmakers need to start somewhere. At 3 percent a year, he said, the average pension of about $3,000 a month would be worth $6,000 in 25 years.
“That’s great if we can afford it,” Maxwell said. “If we can’t afford it, if taxpayers are going to continue to have to put billions of dollars into the system, my question is, how are our children and grandchildren going to pay for it?”
John Palmer, a Cobb County educator and spokesman for the teacher group TRAGIC, called Maxwell’s bill “another broken promise” to teachers.
He said teachers were promised cost-of-living raises long ago, and that educators watched as lawmakers cut education spending, furloughed teachers and used reserves in their health insurance plan to prop up the state budget during the Great Recession. That was followed by higher health care premiums and cuts in benefits.
Teachers aren’t getting state raises from the General Assembly this year, Palmer noted, but lawmakers have been floating tax breaks for select businesses and the state is promising a massive incentive package to attract Amazon to build its second headquarters in Atlanta.
“Instead of raises, legislators are complaining about taxpayer funded retirement for our teachers (we pay into TRS), and again refusing to give our retired state employees a cost-of living adjustment,” Palmer wrote in an “alert” posted online to teacher and retiree groups.
“This,” he said, “is shameful.”
Last session, Georgia lawmakers raised the alarm when they had to provide an extra $223 million to ensure the financial security of the system. This year the figure is an extra $361 million, eating up about one-third of all new state revenue.
The Georgia system is funded through a combination of contributions from employees and employers (school districts, public colleges, state agencies, etc.), as well as investment income.
The "employer," or government, contribution rate paid into the fund — a percentage of employee payroll — will, by the upcoming fiscal year, have more than doubled since 2012. The rate of employee contribution — what teachers, principals, college officials and others pay in — has remained the same for six years.
Buster Evans, the head of the TRS, said the employer contribution rate is expected to go up again next year, but then it is projected to decline for a few years.
Teachers say the money is worth it to the state because the pension system is a great recruiting tool that attracts educators and keeps the best on the job for decades.
Any attempt to alter the current system — which covers about 400,000 teachers, University System of Georgia employees and retired educators — causes a political stir at the Capitol.
Proposals have typically been beaten down before they can get traction. One of the Republican candidates for governor, former state Sen. Hunter Hill, has called for changes, but most of the leading politicians are steering clear of the issue this election season.
The most common suggestion has been to give new teachers 401-(k) type funds — with matching money contributed by the government — instead of the current pensions where they would receive a monthly check for life when they retire.
States across the country have had to subsidize pension plans to prop them up in recent years, draining resources from other areas of their budgets, fiscal experts say.
The pensions that Georgia teachers and employees receive are based on the highest income they earned over a period of time and the years they worked.
Statewide, the average TRS payout last year to the 122,629 retirees in the system was about $36,000.
The system had 84 percent of its pension liability covered in 2014. At the end of 2016, that had fallen to 76 percent. At the end of 2017, after a good year in the stock market, it was back up to 79 percent of the assets needed to pay what it owes to pensioners in the future.
While pension experts typically prefer to see the ratio above 80 percent, it’s an improvement from recent years, and Georgia’s pensions are stronger than similar retirement systems in many other states.
The Great Recession greatly set back the system, which counts on a certain rate of return on investments. The system hasn’t fully recovered from those losses, officials said, even with strong stock performances the past few years.
Also, the number of teachers and employees contributing to the fund had dropped by about 15,000 at one point because jobs were cut or positions went unfilled.
While some of those teaching and state jobs have since returned, there are fewer active workers paying into the fund than there were in 2009. Meanwhile, there are more retirees drawing from the fund as baby boomers retire.
State Rep. Debbie Buckner, D-Junction City, a member of the House Retirement Committee, said the growth in retirees wasn't a surprise.
“We knew it was coming,” Buckner said, “we just didn’t know how to deal with it.”
Buckner said she doesn’t agree with some of her Republican colleagues that the defined-benefit program in which employees are guaranteed monthly checks is the problem.
Kirby isn’t so sure.
“The root of all this is we are still running the defined-benefit program that businesses learned 20 years they couldn’t sustain,” the Loganville Republican said.
While current retirees and teachers should retain the current pension system — what they’ve been promised — Kirby said, “Going forward we are going to have to do something different.”
Battles suggested a two-year study of the system. He also said the state should consider picking a point down the road — say six years from now — when it would start offering different benefits such as a 401(k)-type fund to new teachers, rather than a pension.
“If we are not proactive on this,” Battles said, “we will obviously have to make some hard decisions.”
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