House Bill 109 proposes major changes to the cherished Teacher Retirement System in Georgia. The changes would impact new teachers in the 2019-2020 school year, not current TRS members or retirees.
The sponsor is retired teacher Rep. Tommy Benton, R-Jefferson, who said he’s taking heat for his legislation. At a crowded hearing this week before the House Retirement Committee, Benton, who’s also chair of the committee, said the bill is necessary to put TRS on better footing for the future.
“The state in the last three years has put $1.4 bllion into the retirement system. The state is doing its part. We need new teachers to do a little bit more,” he said.
“My motivation was to come up with some ideas that would help TRS be in better shape financially,” Benton said. “We are not here to change the retirement to anything but a defined benefit plan.”
While he appreciated hearing from teachers, Benton said he wasn’t as happy with comments “questioning my ancestry, calling me a traitor to the profession, crazy. We need constructive criticism...Doing nothing is not an option. There is nothing in this bill that is in stone.”
As the AJC recently reported:
The state and school districts now put about $2 billion a year into the teacher pension system. By 2025, auditors put that figure at close to $2.4 billion, without changes. Actuarial projections suggest that number could be more than $4 billion by 2045.
The "employer," or government, contribution rate paid into the fund -- a percentage of employee payroll -- has more than doubled since 2012. The rate of employee contribution -- what teachers, principals, college officials and others pay in -- has remained the same. Investment income also contributes to the fund.
The Great Recession greatly set back the system, which counts on a certain rate of return on investments. The number of teachers and employees contributing to the fund dropped because jobs were cut or positions went unfilled, and pay raises, which boost payments to the system, were scarce. Some of those trends, such as having fewer teachers, have reversed in recent years.
While pensions are disappearing in private industry, governments have maintained them as a recruitment and retention tool. The pension is seen as a counterweight to the lower pay employees often earn in the public sector.
Among the changes the bill would make: Recalibrate how average final compensation for an educator is determined, using the average of a teacher’s highest five consecutive years.
“Right now, we go to two years. It makes for interesting looking around. And you wonder how some of these folks got these big retirements,” said Benton. “Well, they got raises in the last two years...to boost up their retirement. That is a disservice to all those who didn’t get that. We felt the five years is where we needed to go. And it is fair to all.”
The legislation lowers the maximum earnable compensation that can be used to determine retirement benefits to $200,000.
“We are looking to try to make the retirement system something that will better everyone and not just better those people making real high salaries,” said Benton.
It also sets a range of 6 to 10 percent for mandatory employee contributions; the current range is 5-6 percent.
“When I began teaching in 1974, my first-year salary was $7,200. I paid 6 percent on that salary. The complaint I am getting is people are going to pay more for less benefit,” said Benton. “Nothing is further from the truth. You are going to get every penny you put in there back.”
The minimum retirement age would be 60, and educators would no longer be able to apply unused sick leave toward retirement credit. (Based on angry social media comments, those two issues, along with the higher mandated rate of employee contribution, are among the most objectionable changes.)
Attorney Margaret Ciccarelli, director of legislative services for the Professional Association of Georgia Educators, made this statement to the committee during public comment.
PAGE’s core business is to provide professional learning for Georgia educators. One of our main legislative priorities is to recruit more teachers. We are particularly focused on growing Georgia’s own teachers in rural schools and meeting the recruitment needs of high poverty schools.
We are pleased with Gov. Kemp’s $3,000 teacher pay raise proposal. The starting salary for Georgia teachers is about $34,000, and this robust pay proposal will attract more new teachers to the profession and allow existing teachers to afford to stay there. I mention this within the context of HB 109, so the committee better understands PAGE’s focus on the bill. Chairman Benton was kind enough to meet with us several weeks ago to discuss it. We share his goal of maintaining TRS as a defined benefit plan.
As we discussed when we met with the chairman, it is important to obtain a cost estimate of the various proposals within HB 109. If the goal is to maintain TRS as a defined benefit, it would be helpful for all of us to know more about what the provisions in HB 109 are expected to save. We cannot justify retirement changes for new teachers and jeopardize recruitment efforts without more fiscal information. PAGE respectfully reiterates our request for fiscal impact information.
As for the provisions in HB 109, we are particularly concerned about raising the mandatory employee contribution rate. Currently, the ceiling is set at 6 percent. HB 109 would raise the minimum contribution to 6 percent and cap it at 10 percent. Ten percent would be very prohibitive for potential new teachers and would undo the $3,000 raise.
If policymakers do consider raising the contribution rate, they should narrow the guardrails, consider an 8 percent cap, and strongly consider a schedule to deliver the remaining $2,000 of the promised $5,000 raise to offset the potential negative impact on teacher recruitment.
At the other end of the salary scale are teachers who top out at 20 years on the schedule. After that, they teach with no additional steps. If future educators were strongly incentivized by HB 109 to continue teaching until age 60, policymakers should consider adding new steps to the salary scale.
We hope we can work together with the Chairman to achieve everyone’s goals here. Bottom line: TRS is on solid financial footing. Its funding ratio is higher than many retirement plans, and TRS provides outstanding bang for the public buck. TRS management fees are very low, at 0.06 percent compared with the US average of .44 percent. Additionally, the economic impact of TRS is significant, and TRS has provided economic impact data to you on a county by county basis.
The bill will be discussed again on Tuesday.
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