The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of July 1, 2015, the most recent date for which an actuarial valuation is available, Idaho's pension system for teachers is 85.3 percent funded, an increase of 5.1 percentage points since NCTQ's last report. Its current pension debt is $5,000 per pupil throughout the state. Idaho also has a 17.4-year amortization period. This means that if the plan earned its assumed rate of return of 7.50 percent and maintained current contribution rates, it would take the state more than 17.4 years to pay off its unfunded liabilities. Both levels are better than regulatory recommendations, and Idaho's system is financially sustainable according to actuarial benchmarks.
In addition, Idaho commits excessive resources toward its teachers' retirement system. The current employer contribution rate of 11.32 percent is too high in light of the fact that local districts must also contribute 6.2 percent to Social Security. The rate is set annually according to statutory requirements. While this rate allows the state to pay off liabilities relatively quickly, it does so at a high cost, precluding Idaho from spending those funds on other, more immediate means to retain talented teachers. The mandatory employee contribution rate to the defined benefit plan of 6.79 percent is reasonable.
Public Employee Retirement System of Idaho, Comprehensive Annual Financial Report for fiscal year ended June 30, 2015.
Ensure that the pension system is financially sustainable.
Idaho should consider ways to improve its funding level without raising the contributions of school districts and teachers. It should work to decrease employer contributions - committing excessive resources to pension benefits can negatively affect teacher recruitment and retention. Improving funding levels necessitates, in part, systemic changes in the state's pension system. The goals on pension flexibility and pension neutrality provide suggestions for pension system structures that are both sustainable and fair.
Idaho was helpful in providing information that enhanced this analysis. Idaho asserted that its teacher and district contribution rates are reasonable.