Georgia’s state pensions lose $11 billion in value

The value of Georgia’s two major state pension programs has dropped more than $11 billion in the past 3 1/2 months as stock prices plummeted.

Those declines could help make it easier for state officials to defend withholding retirees’ cost-of-living raises next year.

The Teacher Retirement System and the Employees Retirement System pay pensions to about 115,000 former teachers, professors, school employees and state workers. Another about 380,000 Georgians are either paying into the plan or have in the past, but are not yet collecting a pension.

State officials said Thursday that as of earlier this week, the value of the teacher retirement fund had dropped from $50.3 billion on June 30 — the end of the last fiscal year — to $41.6 billion. The value of the employees retirement fund had fallen from $15.2 billion to $12.5 billion in that time.

System officials said the funds remain sound long term, and that the 17 percent losses over the past few months merely track what’s going on in the markets.

The Dow Jones industrial average is down 23.4 percent since June 30.

“We have the ability to ride out these downturns,” said Jeffrey Ezell, executive director of the Teacher Retirement System. “We’re concerned about it (the decline), but … we don’t get overly concerned because we invest in everything long term. It’s going to right itself. It’s going to get better.”

Pension plans across the country have seen double-digit percentage declines over the past few months as stock prices and other investments lost value.

The Georgia losses come at a time when the Teachers Retirement System Board is considering a proposal by Gov. Sonny Perdue’s administration to eliminate automatic cost-of-living increases that have been given since 1969.

State Auditor Russell Hinton, who chairs the ERS board and is vice-chairman of the TRS Board, said the panels needs the ability to make adjustments based on the financial soundness of the retirement funds. The proposal calls for the TRS board to vote on cost-of-living increases rather than having them take effect automatically. The Perdue administration came up with the proposal before the most recent stock downturn.

Retired educators are irate over the proposed change. They have flooded Ezell’s office, and the offices of TRS board members, with emails and letters protesting the proposal.

After hearing about the pension systems’ losses, James Camp, a retired college administrator from Covington, said he’s concerned about losing his cost-of-living increase next year.

“We depend on my income alone,” Camp, 59, said of his family. “This is important to me.”

Like other retirees, Camp is worried that the state may not only eliminate the COLAs, but reduce pensions.

“People should be concerned about what state government might do to the teacher retirement fund,” he said.

The big short-term losses shouldn’t be surprising, state officials said.

The pension programs are exposed to the whims of the market, like other investment plans. In general, the investments have been fairly conservative, with much of the money in index funds. Retirees criticized lawmakers earlier this year for pushing legislation they said would have allowed the plan to make riskier investments. The bill stalled in the House.

Dan Ebersole, director of the Georgia Office of Treasury and Fiscal Services, said the state’s investment strategy has allowed the pension programs to post strong gains in the past.

But the state pension systems weren’t shielded from the collapse that brought down major financial firms. For instance, the systems lost about $234 million on insurance giant AIG, which was bailed out by the federal government.