State payments to Georgia teachers’ pension fund should begin to ease

And TRS officials are projecting lower employer — state and school system — contribution rates over the next few years.

“I’m glad it’s not going any higher,” said L.C. “Buster” Evans, a former longtime school superintendent who heads the TRS. “That stresses out employers, it has political implications.”

It is good news for teacher groups, who have so far successfully fought off attempts by Republican lawmakers to consider changes to the system, ranging from not giving pensions to new teachers to limiting or eliminating cost-of-living increases for pensioners.

State House Budget and Fiscal Oversight Chairman Chuck Martin, R-Alpharetta, said he had not seen the system's latest reports. But even if they are good, Martin told The Atlanta Journal-Constitution that lawmakers need to thoroughly review the current system.

“For us to honor our commitment to teachers, retirees and taxpayers, I think there needs to be a look at the overall system,” Martin said. “If improvements can be made that make sense, they should be made. We have to have a system that is sustainable.”

Lawmakers have called the system unsustainable in recent years because of dramatically rising costs.

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. Investment income also contributes to the fund.

The TRS set the employer contribution rate for fiscal 2020, which begins July 1, 2019, at 21.14 percent of payroll, up from 20.9 percent in the coming fiscal year. That change amounts to about $25 million more.

The state and school systems will put about $2 billion into the pension system in fiscal 2019. State and local contributions were closer to $1 billion in 2012.

During the 2017 session, Georgia lawmakers had to provide an extra $223 million to ensure the financial security of the system. This year the figure was an extra $361 million, eating up about one-third of all new state revenue.

Any attempt to alter the $74 billion 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.

Many lawmakers who say they want to make changes to the 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 is retiring.

Maxwell proposed limits on cost-of-living raises for TRS members to save money. The bill got a single committee hearing and was never heard from again.

Teachers say the money is worth it because the pension system is a great recruiting tool that attracts educators to Georgia and keeps the best on the job for decades.

The pensions that Georgia teachers, professors and some employees currently 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 has about 74 percent of its pension liability covered, down from about 84 percent in 2014.

Pension experts typically prefer to see the ratio above 80 percent, and Evans said he expects the TRS to get back up to 81 percent in five years.

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.

The number of retirees drawing pensions also increased.

Evans said some of those trends have reversed. The fund got a 12.5 percent rate of return in 2017 because of a strong stock market, and Evans said the TRS has had about an 8 percent return so far this fiscal year, which ends June 30. The TRS counts on about a 7.5 percent annual return on investments.

The number of teachers, professors and staffers contributing to the TRS has also increased in the past few years. And many of them are contributing more because they have gotten raises in recent years.

That may not be as true next year because lawmakers did not approve a state-funded cost-of-living raise for Georgia’s 200,000 teachers, University System employees and government workers. Some teachers, however, will receive longevity increases and locally funded raises.

Overall, teacher groups were pleased by the TRS’ latest financial reporrt.

“We hope policymakers note TRS’ improving financial strength and consider the critical role of TRS in recruitment and retention of high-quality Georgia educators,” said Margaret Ciccarelli, the legislative services director for the Professional Association of Georgia Educators, the state’s largest teacher group.

MORE DETAILS

THEN: At this year's legislative session, Georgia lawmakers had to provide an extra $361 million to ensure the financial security of the Teacher Retirement System. That came after funding an extra $223 million during the 2017 session.

NOW: TRS officials are saying that in the upcoming legislative session, they expect to ask for a much smaller increase for that purpose.

NEXT: State lawmakers could look at changes to the pension system, such as converting it to a 401(k)-type fund for new teachers.