The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of June 30, 2015, the most recent date for which an actuarial valuation is available, Georgia's teacher pension system is 81.9 percent funded, a decrease of 0.4 percentage points since NCTQ's last report. Its current pension debt is about $8,000 per pupil throughout the state. Georgia also has a 30-year remaining amortization period. This is due to an accounting method, however, in which Georgia uses an open 30-year amortization period, meaning that the amortization period is reset to 30 years every year. Thus, the unfunded liability is never fully amortized. Under a closed amortization schedule, if the plan earns its assumed rate of return of 7.50 percent and makes its full actuarially determined contribution payments, it would take the state 30 years to pay off its unfunded liabilities. Both levels are better than regulatory recommendations, and Georgia's system is financially sustainable according to actuarial benchmarks.
Georgia, however, commits excessive resources toward its teachers' retirement system. The current employer contribution rate of 14.27 percent (which increased by 1.12 percentage points) remains too high, in light of the fact that some local districts must also contribute 6.2 percent to Social Security. While this rate allows the state to keep its system well funded and pay off liabilities, it does so at a high cost, precluding Georgia from spending those funds on other, more immediate means to retain talented teachers and crowding out other important educational expenses. The mandatory employee contribution rate of 6.00 percent is reasonable.
Georgia Teachers' Retirement System, Comprehensive Annual Financial Report for fiscal year ended June 30, 2015.
Avoid committing excessive resources to the pension system.
While the state meets actuarially benchmarks for a financially sustainable system, it does so at great cost, precluding Georgia from spending those funds on other, more immediate means to retain talented teachers. The state should consider decreasing employer contributions to allow the state and local districts to spend those funds on other recruitment and retention strategies. However, it must be careful to maintain its funding level to allow for protection during financial downturns.
Georgia did not respond to repeated request to review this analysis.