The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of June 30, 2009, the most recent date for which an actuarial valuation is available, Georgia's teacher pension system is 87.2 percent funded and has a 30-year amortization period. This means that if the plan earns its assumed rate of return and maintains current contribution rates, 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.
However, Georgia commits excessive resources toward its teachers' retirement system. The current employer contribution rate of 10.28 percent is 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 great cost, precluding Georgia from spending those funds on other, more immediate means to retain talented teachers. The mandatory employee contribution rate of 5.53 percent is reasonable. These rates are set to increase to 11.41 percent and 6 percent, respectively, for fiscal year 2012-2013.
Teachers Retirement System of Georgia, Comprehensive Annual Financial Report, for the Fiscal Year Ended June 30, 2010 http://www.trsga.com/media/250697/cafr2010--web%20version--entire%20report.pdf
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 provided updated information that as of June 30, 2010, the state's teacher pension system is 85.89 percent funded and has a 30-year amortization period.
The state also contended that the recommendation is a paradox. The Georgia Teachers Retirement System cannot lower employer contributions and at the same time maintain its current funding ratio and decrease the amortization period. To reduce the amortization period and maintain the funded ratio, the system would have to increase the amount of contributions it receives.
At the time of publication, the 2010 valuation had not been published, so NCTQ has relied on publicly available information.
NCTQ realizes that pension payments place a strain on budgets and that maintaining a financially solvent system can create difficult situations. Georgia is unique in that some districts participate in Social Security and some do not. Its current contribution rate is fair for those districts that do not participate, but can be burdensome for those districts that do participate, mandating that they contribute over 16 percent (close to 18 percent in FY '12-'13) to teachers' retirement. The solution to the paradox lies in more systemic changes, such as those discussed in Goals 4-G and 4-I.