A year after a plunge in the stock market dropped the value of Georgia’s massive teacher, university and state employee pension systems by $15 billion, the Teachers Retirement System and Employees’ Retirement System have seen a comeback of sorts.
The two systems, which provide monthly benefits to more than 190,000 retirees and their beneficiaries, did not make all the money back it lost on paper when the stock market tanked in fiscal 2022, but it gained plenty of ground.
The state fiscal year ended June 30, and the TRS reported its fund was at $94.7 billion, up from about $87 billion the year before.
The smaller ERS system, which covers retired state workers, saw its assets improve from $13.8 billion to $15 billion in the same time.
The finances of the two funds are closely watched because hundreds of thousands of teachers, professors, college staffers, state employees and retirees either pay a chunk of their salaries into the system and are due pensions, or they are already receiving benefits.
They are also closely watched because lawmakers over the past decade or so have debated making changes to the pension systems over fears that they are unsustainable given the billions the state and school systems contribute.
The pensions are funded through a combination of employee contributions, money from taxpayers and investments.
An audit in 2019 said that without any changes the state and local school district contributions into the plan would rise to $2.4 billion by 2025 and $4.4 billion by 2045. That would make contributing into the teacher pension system one of the state’s biggest expenses.
Legislation filed in recent years by Republicans to make changes to the system have stalled, in part because of strong lobbying efforts by teachers and retirees who have flooded members of the House Retirement Committee with calls and emails opposing the bills lawmakers filed.
The most common suggestion has been to give new teachers 401(k)-type funds — with matching money contributed by the government — instead of the current pensions where they would receive a monthly check for life when they retire.
Credit: Hyosub.Shin@ajc.com
Credit: Hyosub.Shin@ajc.com
New state employees already aren’t eligible for a full pension, although the head of the Georgia State Patrol, Col. Chris Wright, recently urged lawmakers to consider one for law enforcement in an effort to help the agency hold onto patrolmen for 20, 25 years, rather than seeing them leave for other jobs.
Teachers see the chance for educators to retire after 30 years or so and receive a good pension as one of the state’s best recruiting tools to attract young people into the profession and keep them in schools.
At the end of fiscal 2022, almost 130,000 TRS retirees were receiving on average about $42,000 a year in pension benefits.
The system’s financial heath follows trends in the stock market. When the market is up, the system sees its assets climb. When it’s down, it goes the other way. It pretty much mirrors what private investors are seeing.
Assets for the programs have yo-yoed in recent years. In early 2020, as the COVID-19 pandemic hit, the market plummeted and the teacher pension fund watched assets drop $15 billion in a few months .
The economic recovery and soaring stock market that followed in fiscal 2021 brought the Teachers Retirement System to new heights, giving the fund its best year since the 1980s.
And then it plunged again, losing $15 billion as the stock market dipped in the second half of 2021 and early 2022.
Republican lawmakers in recent years have pushed for the funds to add more “alternative investments” to their portfolios, such as investing in private equity funds that might, for instance, take over a company. The definition of what constitutes an “alternative investment” is broad — they can also include hedge funds, real estate and commodities — which is why there has been some opposition in the past from those who considered them more risky.
Buster Evans, executive director of the pension system, said the TRS has only a fraction of its money in “alternative investments.” That, he said, turned out to be a good thing during the past fiscal year because the broader stock market performed better for the state funds than those alternative investments.
“The returns for us seem to be higher than many funds that I have seen largely due to the fact that our lower percentage of alternatives worked in our favor,” Evans said.
The TRS fund stood at $102 billion at the end of fiscal 2021 — on June 30, 2021 — so it will take a bullish market to top that record in the coming year.
Teacher pension fund’s strength
Below are the end-of-the-fiscal-year assets of the Teachers Retirement System:
Fiscal 2023: $94.7 billion
Fiscal 2022: $87 billion
Fiscal 2021: $102.2 billion
Fiscal 2020: $81.2 billion
Fiscal 2019: $78.9 billion
Source: Teachers Retirement System
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