The board that runs Georgia’s massive teacher pension program voted Wednesday to begin billing the University System of Georgia about $180 million extra a year, money that state auditors said colleges had owed for more than a decade but never paid.
The universities caught a break of sorts: The Teachers Retirement System board did not support a motion to begin billing right away. The board voted to start asking for the extra money in fiscal 2021, which begins July 1 of next year.
That means the system won’t have to make dramatic changes, such as making deep cuts in spending or adding new costs for students, before the General Assembly meets again in January.
The TRS board made the decision after more than an hour of sometimes heated discussion in which some members wanted to immediately right what they say was a wrong, and others said the panel was rushing to a decision without having all the facts.
“This is obviously an issue that people feel very differently about,” said Alvin Wilbanks, the chairman of the board and superintendent of Gwinnett County’s schools. “We are dealing with some serious business for both agencies.”
The $78 billion retirement system is both a big deal to hundreds of thousands of teachers, university staffers and retirees in Georgia and a hot political topic at the General Assembly.
More than 128,000 retired teachers, professors and other university staff receive benefits, averaging about $37,000 a year. This year the state and local school systems put about $2.6 billion into the TRS and its companion, the Employees Retirement System, which provides benefits to retired state employees.
More than 200,000 current employees pay part of their checks into the TRS, with the rest of the fund’s money coming from taxpayers and investments.
Most private businesses long ago moved away from providing pensions, and rising costs have lawmakers pushing legislation to change benefits for future teachers and university staffers. That legislation hasn’t gone anywhere so far, but teacher groups fear any bad financial news could revive those efforts.
The vote Wednesday came four months after state auditors said Georgia’s universities had been shortchanging the teacher pension fund for a decade by about $600 million.
University System officials dispute the auditors’ conclusion and say the system pays more than its fair share. They said forcing the system to immediately make new payments — which the board considered — could have had serious consequences, including major spending cuts at colleges and higher tuition or fees for students.
The state Attorney General’s Office weighed in a few days before the meeting, saying the University System didn’t owe the money for this year and next, in part because the General Assembly didn’t allocate the money in the state budget.
At issue are payments auditors said the University System was supposed to make after it created something called an Optional Retirement Plan in 1990. Essentially, the plan allowed University System staffers to choose a 401(k) over a pension. In a 401(k), the employer and employee put money into a retirement investment fund, which the staffer can take with him when he leaves. In a pension, the employee who works for a certain number of years receives a regular payment from the TRS when he or she retires.
When the optional plan was created, state law required the University System to make payments into the TRS to fund the long-term liability of retirees.
The payments were to prevent the long-term pension costs of retirees from being borne by the state or school districts by balancing the ratio of active employees paying into the TRS and retirees drawing money out of the TRS, auditors said.
The University System made the payments through 2001, when the pension system had the money to meet its future responsibility to retirees, and the TRS — based on a report by its actuary — determined the payments were no longer required.
Auditors said the law requiring the payments was never repealed, and that they should have resumed in 2008, when the Great Recession started hammering investments in the retirement system, helping create another pension liability. But the TRS never began rebilling the University System.
Auditors — the state auditor is a member of the TRS board — said the University System requested funding for the payments from the General Assembly that were in turn never made to the retirement fund. University System officials say that is not true, and that, in fact, colleges pay more than their fair share into the fund.
Steve McCoy, a member of the retirement board and until recently the state’s treasurer, tried Wednesday to slow down the move to bill the University System, saying the report had not been vetted by the panel’s audit committee.
“There are more unanswered questions than answers,” McCoy said.
Delaying the bill until next year allows the University System to seek money from the General Assembly during the 2020 session to come up with the payment.
It also gives the General Assembly time to consider legislation, sponsored by House Retirement Chairman Tommy Benton, R-Jefferson, to codify the University System’s position that it doesn’t owe the money in the first place.
Benton’s bill will be considered by the House Retirement Committee over the summer and likely be voted on during the 2020 session, which begins in January.
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