Opinion: Can we do better with Georgia’s Teacher Retirement System?

A new study finds 28.3 percent of teachers in traditional public schools miss 11 or more days of school for illness or personal reasons. In contrast, the figure for teachers in charter schools is 10.3 percent.
(AJC File)

C. S. Thachenkary served for more than three decades as an associate professor in the J. Mack Robinson College of Business at Georgia State University before retiring at the end of 2015. In this essay, Dr. Thachenkary discusses the Teacher Retirement System, which has been in the news lately.

Last week, the AJC’s James Salzer reported:

Georgia lawmakers raised the alarm earlier this year when they had to provide an extra $223 million to ensure the financial security of the state’s massive teacher pension system.

The Atlanta Journal-Constitution has learned that next year the government may have to put in almost twice that amount, eating up much of the new revenue the state expects to take in to pay for increased public health care and education costs, and possibly teacher pay raises.

The Teacher Retirement System’s board recently voted to increase the “employer,” or government, contribution rate to the fund by almost 25 percent starting July 1 of next year. That rate — a percentage of employee payroll — will have more than doubled since 2012. State officials will factor that into the budget lawmakers have to vote on during the 2018 General Assembly session, which begins in January.

State officials are estimating the bump could require an additional $375 million to $400 million contribution by taxpayers into the fund — on top of the more than $1.5 billion a year paid in now. That’s likely the largest one-year infusion of money into the program ever.

With that background, here is Thachenkary’s essay.

By C. S. Thachenkary

The AJC’s James Salzer reported last week that the state Legislature may need to allocate $400 million more to its Teacher Retirement System next year. This will be on top of the $223 million the state added to the fund this year.

In 2015, TRS had a funding ratio of only 79 percent. This ratio suggests that for each dollar of pension benefit TRS owes to its members, it only has 79 cents to meet that liability. A ratio over 1.0 indicates it can cover all benefits. Ratios below one suggests the opposite. Ratios in the 90 percent range are considered strong. The American Academy of Actuaries suggests that pension funding objective should be 100 percent. That is, full funding: one dollar in assets for each dollar in liabilities.

Georgia’s TRS used to be much healthier. In 2006, it had a funding ratio close to 97 percent allowing it to be ranked amongst the best managed in the country. How did we drop down to its current low level?

The great recession of 2008 is one factor. But the stock market has rebounded since. The Dow Jones Industrial Average had hit a low of about 6,500 in March 2009. Today, the Dow stands at almost 21,200, a more than three-fold increase. The broader index of S&P 500 has shown similar improvements. By 2016, the markets had registered three-fold increases.

However, after losing nearly $8 billion in the great recession, TRS assets have grown from $42.9 billion in 2009 to $65.6 billion in 2016. This represents growth by a factor of 1.5, not the three-fold increases we have seen in the broader stock market.

TRS does not put all its assets in stocks. Wisely, it does use a balanced portfolio of stocks and bonds. This ratio has grown in recent years reaching over a 70 percent/30 percent split for a number of years, but falling back to 68 percent/32 percent in 2016. (TRS is allowed to allocate up to 75 percent in stocks and 25 percent in bonds.) This is one factor that needs scrutiny.

That is, for a fiduciary account, is TRS taking a riskier exposure to the equity market than is desirable? Is a more “conservative” allocation of 60/40 percent or even lower warranted? (TRS cherishes “conservatism.”) For a 70/30 balanced portfolio, TRS averaged just over 6 percent compounded annual growth from 2009 to 2016. This is not significantly better than what an individual investor with a passive bent could have obtained by simply buying a mutual fund with similar asset allocation.

In 2016, TRS paid over $15 million in personnel and administrative expenses and $38 million in investment fees and expenses. (Over $59 million in total, including commissions.) TRS portfolio managers are amongst the highest paid employees in the state. Legislators need to ask if the fund expenses are justified relative to fund performance?

A final point to consider is this. In 2003, TRS adopted an investment return of 7.5 percent to calculate its actuarial liabilities, well above its recent average annual growth rate. If a lower rate is assumed, it could have an adverse impact on the valuation of accrued liabilities and possibly distort the reported funding ratios.

Overall, the time has come for the Legislature to examine the fund’s management and its performance, investment fees and expenses, asset allocation strategies, and actuarial assumptions used to value accrued liabilities. Clearly, remedial actions are needed to put TRS on a stronger footing so it can meet its members’ pension obligations while not causing a growing burden on the taxpayers of Georgia.

Reader Comments 0

154 comments
Lee_CPA2
Lee_CPA2

Lengthy thread below about teacher salaries, summers off, yada, yada, yada.

Per the Bureau of Labor Statistics, the average salary of a high school teacher in GA is $56,420.  As others have pointed out, that is based on a 190 day pay schedule.  In the private sector, employees work the full 260 workday year, less a typical benefits package of 10 days holidays and 15 days vacation for a net of 235 days actually worked.

If you extrapolate a 190 day / $56420 teacher salary to 235 days, that salary is equivalent to a $69,780 salary in the private sector, which is right in line with many degreed, salaried professionals. 

ChrisRMurphy
ChrisRMurphy

@Lee_CPA2 Most teachers put in far more than 40 hrs./week, so enter that into your calculations.


Lee_CPA2
Lee_CPA2

Most in private enterprise moved away from defined benefit pension plans thirty years ago for many of the reasons outlined in the article.  Simply put, they are unsustainable long term.


" In 2003, TRS adopted an investment return of 7.5 percent to calculate its actuarial liabilities, well above its recent average annual growth rate. If a lower rate is assumed, it could have an adverse impact on the valuation of accrued liabilities and possibly distort the reported funding ratios."

That's troubling to me.  Why would they use inflated growth rates in their calculations unless they were trying to hide the impending crisis?    They apparently got away with due to increases in the number of teachers paying into the system.  The term "Ponzi Scheme" comes to mind.


Laurie8750
Laurie8750

Pensions in general are not sustainable.  They need to be switched to 401Ks, or the state can file for bankruptcy in the next decade... teachers and  state employees will just be SOL then.

AvgGeorgian
AvgGeorgian

@Laurie8750

That is not true. The state can reduce the number of administrative positions, cut construction on college campuses, raise taxes, use flexibility for SPLOST, etc. Are you jealous of teachers low pay but decent retirement benefits in lieu of higher pay? If so, become a teacher. What's stopping you?

Starik
Starik

@AvgGeorgian @Laurie8750 It's time we joined the rest of the world. Government pensions, government health care and qualified, well paid teachers.

MaryElizabethSings
MaryElizabethSings

@Starik @AvgGeorgian @Laurie8750


Starik, that was one of FDR's and Eleanor Roosevelt's dreams not only for all Americans, but through the extended efforts of Eleanor Roosevelt in enhancing FDR's dream, for all of the people on this Earth, over time.

MaryElizabethSings
MaryElizabethSings

After reading through all of the comments on this thread, it is obvious to me that each American citizen and each Georgian is going to have to decide for himself or herself whether he or she will perpetuate a selfish, self-serving, and mean-spirited America for the world to observe and emulate, or whether we are, instead, going to give back to our families, our communities including our schools, our states and nation, as well as our common home, Earth, more than we, each, take from those we serve.

Astropig
Astropig

@MaryElizabethSings


Did you have a good weekend at Bonnaroo? The above sounds like you sampled some of the "consciousness raising" medicinal herbs being peddled there in little ziploc bags.

AvgGeorgian
AvgGeorgian

@Astropig @MaryElizabethSings

Astro, that is a weak, unsophisticated stab at a barb-failed humor excepting pre-adolescent proclivities.  But you know your fans better than I.

MaryElizabethSings
MaryElizabethSings


This thread was productive in providing citizens with vital facts and information regarding the TRS until Astropig started with personal attacks, above, thereby shifting the focus from important content onto inane, juvenile remarks.  I hope that this problem can be dealt with, effectively.

Ogosatah
Ogosatah

Is any of this increase in the need for taxpayer funding due to the increase in cost of the health insurance for retirees? I know from my personal and other family members that the TR health insurance coverage is one of the best, far better than Medicare. Everyone on TRS does not receive that health insurance. Perhaps that is one facet of the system that needs adjustment in light of redundancies available to retirees by Medicare Insurance. In short: are we talking about the pension costs or are we talking about pension and health insurance costs?  

OriginalProf
OriginalProf

@Ogosatah 

From my "Member's Guide" of the TRS: "TRS does not  administer any health care benefits for retirees" (p. 20). These are arranged with the retiree's employer.  Quite separate from TRS.

MaryElizabethSings
MaryElizabethSings

@OriginalProf @Ogosatah


I must add that for teachers retired from grades 1 - 12, not university level, the retiree's "employer" is the state of Georgia, not the individual school systems within Georgia.  The state of Georgia in conjunction with the governor's staff, the Department of Community Health (the old STATE MERIT BENEFIT PLAN), and Georgia's Legislature  determine the state health benefits(s) yearly (when teachers are allowed to choose between two options of providers, such as United Healthcare and BC/BS) for Georgia's retired teachers 1 - 12, with Medicare setting the primary standards for those over 65 and on Medicare Advantage.

Zzyzxman123
Zzyzxman123

When you say teachers make 50k per year and only work 180 days and that the average Georgian  makes only 46k,  you are averaging in  all of the "fast food" "convenience store" workers in the state. Also, yes teachers work 180 days,  i bet you didnt know that the average teacher works 80+ hours a week! thats a 16 hour day. DO the math before you suggest that teachers are living high on the hog. And most teachers do pay into social security, very few don't and as a result they forfeit all SS benefits with they retire..

Starik
Starik

@Zzyzxman123 Teachers who have poor English abilities, and graduated from bad colleges toward the bottom of their class are overpaid now.

AvgGeorgian
AvgGeorgian

@Starik @Zzyzxman123

If you believe in a free market, they are not overpaid. If you want more highly qualified teachers, be prepared to increase pay.


Would you be qualified to teach?

Starik
Starik

@AvgGeorgian @Starik @Zzyzxman123 I believe I would be. I was going to be a college teacher before I was drafted in 1969. I'm in favor of increased pay and some real standards for teachers.

J260
J260

Average annual teacher salary in Georgia is over $50K.


http://www1.salary.com/GA/Public-School-Teacher-salary.html 


Average annual salary for all Georgians is only $46K


https://www.bls.gov/oes/current/oes_ga.htm#00-0000 


So, teachers are paid more than most Georgians, for working 180 days per year and having their summers off, they don't have to pay into Social Security, and they get this awesome guaranteed pension after 30 years (usually in their early- to mid-50's) when everyone else has to work well into their mid- or late 60's to get far less in Social Security.

And out kids are graduating from these public schools dumber and dumber every year.


Hmmmmmm.......................

Aequitas
Aequitas

@J260 Starting pay in most counties is under 40k per year.  Teachers have to work nights grading papers and weekends doing lesson plans.  Many teachers, like my wife, have been seeing doctors for foot problems because they are on their feet day after day, month after month, without a break.  I'll bet you can have lunch by yourself, and I'll bet you get to sit down.  I dare you to teach for a year, put up with people like yourself who criticize without understanding, and then say you've been overpaid?  Hmmmm... Take that dare?  No?  I thought so.

J260
J260

@Aequitas @J260 Teacher average starting pay is also higher than average starting pay for all.  Look at the same two links.


As far as how hard your wife works, cry me a river.  Looks to me like neither of you have any idea what true hard work looks like.

J260
J260

@Aequitas @J260 NEWSFLASH:  People in private industry often put in overtime, work weekends, and have to be on our feet.  Only none of us get our summers off nor get a gravy taxpayer-funded pension after only 30 years in the work force.

J260
J260

@Aequitas @J260 I dare you and your wife take responsibility for saving and investing your own money for retirement, like all the rest of us have to do.  No?  I thought so.

Aequitas
Aequitas

@J260 @Aequitas Please, J260 - Tell me what hard work is?  What do you do for a living?  How many hours a week do you work?  And how much do you make?  Do you get to sit down?  And do you have to work nights and weekends in addition to days?  Hmm, I thought so.  You're just another blowhard who knows nothing about the other side.

Aequitas
Aequitas

@J260 @Aequitas I'll take that dare.  My wife has a private retirement account in addition to her pension.  Yes, we have been saving and investing for retirement.  You know nothing about what a teacher does.  Blowhard.  Live on the other side for a while and let's see what you think.  I see you refused to take my dare.

AvgGeorgian
AvgGeorgian

@J260

Teaching requires a specified bachelor's degree, internship and certification. Many teachers have additional advanced degrees. You are comparing apples to oranges (plus every other fruit).

A better comparison using your own link would be to compare teaching to this job - Occupational Employment and Wages, May 2016 - 13-1151 Training and Development Specialists at  $61K. 

As to SS, some teachers pay into SS, while some don't : BUT  if you don't,  you only get benefits based on what you may have contributed from another job,  and there is a severe penalty reduction to that amount if you didn't pay while a teacher.

As to the "dumber and dumber", please cite your reference.

Your casual use of mismatched statistics to argue your point may indicate a lack of analytical and research skills. Would you attribute this to a failure by the public school you attended?



https://www.bls.gov/oes/current/oes_ga.htm#13-0000

teachermom4
teachermom4

@J260 @Aequitas We also pay into our own retirement. The money I would put into social security goes into TRS instead-it is solely funded by taxpayers. My employer is a school system. The money they would have put into social security goes into TRS instead, just like every employer pays into one kind of system or another. In my county, social security is not an option.  Should my employer pay nothing toward my retirement?

teachermom4
teachermom4

@J260 You do realize that data shows that only between 25% and 30% of adults hold college degrees. Those "average" salary numbers do include people who work in fast food and other jobs requiring little training or education. It does not make sense to base teacher salaries on what the "average" is, since the "average" requires less education and training.

Starik
Starik

@Aequitas @J260 Where did your wife go to college? What was her major? What was her class standing?

Zzyzxman123
Zzyzxman123

@J260 @Aequitas Just be quiet and do your research before you start bashing teachers. You looking like a moron with your ignorant talk!

AvgGeorgian
AvgGeorgian

@J260 @Aequitas

Plenty of private industry workers make very high salaries with great benefits. Why don't you?

AvgGeorgian
AvgGeorgian

@J260 @Aequitas

Teachers usually pay 6% into TRS plus 7% into SS with the employer paying an avg. of 12%(forgone salary) into TRS. So a teacher has the equivalent of 25% deducted from his/her pay and that is not taking responsibility?

Falcaints
Falcaints

@J260 Several points; 1) I am paid to work 190 days, I do not receive pay for weeks I don't work.  So "summers off" means no pay. 2) I do pay social security, only a handful of systems opted out when that was allowed most of us pay.  3) If you are so envious of our retirement plan, perhaps you should have been a teacher. 4) I hardly think that 60% of our highest salary  is exorbitant.  5) If you do, see number 3.

OriginalProf
OriginalProf

@Falcaints @J260 

"Summers off" really means that the teacher has arranged to have his/her annual salary paid over 12 months instead of 10.

Astropig
Astropig

@OriginalProf @Falcaints @J260


This is a BS argument that obviously has been drilled into teachers to try to deflect criticism for the fact that they work about 190 days out of 365 and get paid for a years work.If CEO's got that much time off,you'd be after them with pitchforks and barrels of tar.


It is what it is.You people are so defensive about it that you just look like idiots.

AvgGeorgian
AvgGeorgian

@Astropig @OriginalProf @Falcaints @J260

You seem jealous and uninformed. School system contracts range from 175 - 240 days depending on the job. Your pay is based on the number of days in your contract. more days = more money.

Astropig
Astropig

@AvgGeorgian @Astropig @OriginalProf @Falcaints @J260


I don't know why they're so ashamed of it,then.You work,you get paid,end of story.This denying that they get summers off makes them look like people that can't tell a basic truth without getting all worked up about it.


I work about 100-120 days a year.I set my own sked.I'm proud of it.It's a perk. Teachers should just stop blowing a gasket when someone brings it up.



AvgGeorgian
AvgGeorgian

@Astropig @AvgGeorgian @OriginalProf @Falcaints @J260

I believe the disconnect is the idea that teachers are paid for 260 days and only have to show up to work on 190 days.


Many teachers work many days outside their contract. principals may advertise the availability of days that teachers may access the building(to work for free).

J260
J260

No sweetie, jealousy has nothing to do with it. We taxpayers are sick and tired of pulling the wagon you ride in, that's all.

J260
J260

You have NOTHING to do with what I have. ZERO. Crawl back into your safe space, snowflake.

MaryElizabethSings
MaryElizabethSings

@J260

"Sweetie," to a 74 year old retired teacher.


Something is wrong with that and people should care about what that says about the devaluing of human life in our nation, today.

MaryElizabethSings
MaryElizabethSings

@J260


Moreover, I have always paid my own way, J260, before I became a teacher and afterwards.  I paid into my own retirement plan, and I let the state's best investment analysts invest that money for me, as well as for other teachers.  You are suffering from a strong dose of jealousy in your own heart, which has nothing to do with retired teachers.  

Starik
Starik

@MaryElizabethSings @J260 Jealousy is strong in those without real pensions. After we get Medicare, improved for everybody we can go for universal government pensions.

Zzyzxman123
Zzyzxman123

@J260 @Aequitas You have no clue what you're talking about.  I have been a public school teacher for 16 years, put my heart and soul into making sure each and every child has a world class education. I also served 4 combat tours with the Army(13 Foxtrot) over 8 years. I KNOW what hard work is. Please stop your ignorance. You would have what you have if it wasn't for us.... Give me a damn break!


Wascatlady
Wascatlady

@J260 190 days per year.  Learn more. Summers are only nominally "off."  Most teachers DO have to pay into SS.  If they don't they don't draw SS (happened to my co-grandmother, who worked for Gwinnett) when they retire.  You can't argue that they don't pay into SS AND that they get too much SS!


I started teaching 3 weeks after I turned 21.  I could have retired at 51.  What is your point?  As it was, I taught 41 years.  Now I volunteer about 15 hours a month in the schools.

elementary-pal
elementary-pal

@J260 @Aequitas AND...unless you are a salaried employee (like teachers) you get overtime pay at 1.5X.  If you are salaried, you get comp time.  Consider the time teachers get off as comp time for their overtime during the year.  AND just to set the record straight...teacher contracts are for 190 days, not 180. AND...in private industry, rarely is there a ceiling on your salary, as there is mine.  After 22 years there are no more steps on the pay scale, I might get a cost-of-living raise  - 2% whoopee!  AND...as for having summers off, I am about to join a group of 40 teachers who are giving up the next three days of their vacation to learn more about their practice - and no, they are not paid for their time.  AND...the teachers in my building will report at least a week early, if not two, to get their rooms ready for students - putting up bulletin boards, decorating the room, putting away supplies they purchased with their own money.  I had a group of teachers in the building today to pick up books and materials for their planning session they were having later this week - on their own time. 


I pay into TRS and to Social Security. I pay extra into a private retirement fund and I do one the most important jobs in the world - I care for and teach children.  I believe my retirement will be well-deserved.

DrProudBlackMan
DrProudBlackMan

@Astropig The only people "blowing a gasket" are you deplorable haters who come here to slam educators over any and everything. Your wife's brief experience as a teacher left you extremely butt hurt hasn't it?