A Savannah Morning News editorial published on June 22, 2018 warns that teacher pension reform is crucial for teachers and taxpayers. The editorial can be accessed online here and is reprinted in full below.
The tax villains ran roughshod this week, passing increases that will appear across several columns in our fall property tax bills.
As is always the case, the public is assigning blame. And, as always, they point to the easy targets, the men and women who hold titles such as manager or superintendent; mayor, chairman or president; or alderman, commissioner or school board rep.
The one true scoundrel in our tax chaos, who goes by the initials TRS, is largely avoiding public condemnation.
Georgia’s Teachers Retirement System is straining the taxpayers. Pension fund increases accounted for $9.8 million of the roughly $14 million hole in the public school budget the board filled this week with a significant millage rate increase. That’s more than 21 times what the taxpayers would have owed toward the much-maligned — and now repealed — fire fee.
Alarmingly, that $9.8 million contribution does nothing to shore up the pension fund kitty beyond 2019.
Statewide, taxpayers have put more than $2.5 billion into the Teachers Retirement System since 2012. Yet the percentage of liability covered continues to fall – and the next significant economic downturn is sure to crater it, indicates an analysis done by the Reason Foundation, a nonpartisan public policy research organization, in conjunction with the Georgia Public Policy Foundation.
Rather than waste time pointing fingers about our tax woes, let’s instead issue a call to action to the lone group of leaders who can reform this underperforming and antiquated retirement vehicle: our state legislators.
Georgia phased out the pension system for state workers a decade ago. Those already employed by the state as of Dec. 31, 2008, stayed on the existing plan, but all employees hired on and after Jan. 1, 2009, moved to a hybrid pension and savings plan.
Moving teachers to a similar model has been talked about in the Georgia General Assembly but never seriously considered. The teachers associations hold tremendous influence, even in a Republican-dominated legislature. Many of the Republican legislators represent rural districts, and school systems are among the largest employers in those areas.
The Teachers Retirement System is therefore the elephant in the Gold Dome, a pachyderm best ignored.
Engage our senators and representatives in a theoretical discuss on the subject, though, and it’s clear they understand the shortcomings. They mention transitioning to a market-based, employer-matching contribution model or at the very least adopting a defined benefit structure that is based on sound assumptions.
The current plan assumes a 7.5 percent return on assets over time. Investment experts say a return around 6 percent is more likely based on the system’s portfolio. The spread equates to billions of dollars.
Teachers deserve a comfortable retirement.
They’re underpaid given the challenges involved in their work, and a guaranteed income in their golden years is a major perk.
For those entering the profession today, however, the pension model comes with guaranteed risk. The millennial generation is a transient one, both in terms of geography and career arc. Pensions like the Teachers Retirement System benefit only members who stay in the same state and at the front of the classroom for at least a decade.
A review of financial reports of teacher pension funds of all 50 states by a national nonprofit, Bellwether Education Partners, shows that for teachers hired after Aug. 1, 2016, only 29 percent will work the 10 years required to qualify as vested. Only 20 percent will work the 22 years to reach the break-even mark. And only 17 percent will reach the normal retirement mark of 30 years.
A pension guarantees these young teachers nothing, whereas a 401(k)-like plan would allow them to roll their funds over should they leave the state or change professions.
The long-held notion that changing teacher retirement plans is akin to robbing educators of their retirement deserves an F grade and a few hours in detention.
The Georgia legislature should take this opportunity to explore alternatives to the pension fund. Reform would benefit both the teachers and the taxpayers.
Thank you for the great work that the Public Policy Foundation is doing across our state setting a wonderful example. I first ran for the Senate in 1994, and the Foundation was that resource I called upon to be a great help to me as we were articulating positions and formulating public policy initiatives. We appreciate very much your leadership and all that you stand for.