“If you do all these things, you are going to show a tremendous cost,” said Buster Evans, the executive director of the Teachers Retirement System.
>> Related: Big tab expected to fund pensions owed to retired Georgia teachers in the future
Teachers, retirees and education groups say the system is key to recruiting and retaining teachers. The average pension is about $37,000 a year.
However, some members of the retirement committee, such as House Higher Education Chairman Chuck Martin, R-Alpharetta, fear the system is unsustainable if it remains unchanged.
The Great Recession greatly set back the system, which counts on a certain rate of return on its 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 employee payments to the system, were scarce until this year. Retirees are living longer, which means more is being paid out.
An audit earlier this year said the state and local school district contributions into the system would rise to $2.4 billion by 2025 and $4.4 billion by 2045 without any changes. That would make contributions into the plan one of the state's biggest expenses.
The system is funded through a combination of employee and employer contributions, plus investment earnings.
The TRS has assumed a 7.5 percent annual rate of return on the fund’s investments. While Evans said the average return since 2000 has been 7.4 percent, Martin said that does not account for stock fluctuations that dramatically dropped the value of the fund during the Great Recession.
Evans said the TRS board will consider dropping the rate to 7.25 percent. A bill by House Retirement Chairman Tommy Benton, R-Jefferson, a retired teacher, would drop it to 6.75 percent. Lower investment income might force state and local taxpayers to put more into the system to make up the difference.
A bill Martin is pushing would speed up the state’s funding of billions of dollars in unfunded liability — what the system owes in benefits to those who are part of the system.
Martin said, if approved, his bill would be the equivalent of switching from a 30-year to a 15-year mortgage. As in the case of a shorter-term mortgage, it would require state and local districts to increase their funding until the liability is paid off.
“I’m not going to lie, it’s going to be a big number,” Martin said. “I think it’s important for what we need to catch up.”
Benton said much the same. “I think when the bill comes back,” he said, “you are going to see the number is astronomical.”
Evans put the added costs at “hundreds of millions more” per year.
After spending much of the state’s new revenue to stabilize the system in 2017 and 2018, adding hundreds of millions more in cost per year may be unpalatable to lawmakers if it eats into other budget priorities.
Still, Martin said it’s important to see how much it would take to fully fund the retirement system.
“I am talking about us being realistic about the promises we have made to teachers,” Martin said.
Georgia’s teacher pension system
The Georgia Teachers Retirement System has about $78 billion in assets and provides pensions to retired Georgia educators from the state’s k-12 and higher education systems. Some facts about the system:
- It collected $2 billion last year in taxpayer contributions from the state and local school districts.
- It paid out $4.7 billion to retired educators.
- The average pension last year was about $37,000.
- 127,223 retirees received benefits in fiscal 2018.
- More than 200,000 current teachers, school and University System of Georgia employees pay into the Teachers Retirement System.
Source: Georgia Teachers Retirement System
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