Press release [Jan. 26, 2006]

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House Speaker Glenn Richardson House Bill 127

FOR IMMEDIATE RELEASE: January 26, 2006
Dear Constituent,

CONTACT: Michelle Hitt 404.656.5020
E-mail Michelle

Thank you for contacting my office regarding House Bill 127. This bill proposes to change the multiplier for calculating retiree's benefits from 2% to 2.5% per year of service. Essentially, the bill proposes to change the amount of benefits for a retired teacher with 30 years of service from 60% of their annual salary to 75%.

As with all retirement bills, an actuarial analysis was conducted to estimate the cost to implement this bill. Here is what the analysis shows:

q The annual cost for the first year and each of the additional 19 years thereafter, is $788 million dollars. According to the Teachers' Retirement System (TRS) calculations, this would require an increase of 8.39% to the employer's contribution rate (raising the current rate of 9.2% to 17.59%

In addition to the actuarial analysis showing the cost of this bill to be approximately $800 million dollars per year, a significant amount of misinformation has been presented concerning the amount of assets in the TRS. A recent email attributed to one of our representatives, states that the fund has over $39 billion dollars in assets. The email concludes the teachers should be entitled to the money in the fund. We agree. Teachers are entitled to the money in the TRS fund. In fact, the money in the fund is reserved for teachers, those who have already retired and those who are active and one day expect to retire. Moreover, the fund actually has current estimated assets of $46 billion dollars. Yet, the fund's liabilities and obligations to teachers are an almost identical number.

There are currently over 67,000 retirees receiving monthly benefits from TRS at a cost of approximately $164 million dollars each month. We as members of the General Assembly have the responsibility of keeping this fund financially sound.

To further explain the details of the TRS, we asked Jeff Ezell, Executive Director of the TRS, to provide a letter on the actuarial viability of the entire plan. As you can see by the attached letter, while the fund has significant assets, it has significant liabilities and obligations in an equal amount for the teachers of this State. So, without an appropriation of approximately $800 million dollars per year, the fund cannot afford to have House Bill 127 enacted and also guarantee teachers will have their benefits at retirement.

To summarize, please remember the following:

q The cost of House Bill 127 is approximately $800 million dollars per year for the first year and similar amounts for each of the next 19 years, making this proposal the most expensive TRS retirement bill ever proposed.

q While the TRS currently has significant assets, it has significant obligations to retired teachers and teachers who expect to retire as well.

q We do not intend to do anything that would compromise the ability of the TRS to provide retirement benefits to our teachers in the future

While we do always wish to recognize the dedication and work of our teachers, we must also be fiscally responsible with the tax dollars of Georgia's citizens. Thanks to increasing state revenues and a brighter economic outlook for Georgia, education funding will receive over 70% of new revenues and teachers will receive a much deserved pay increase this year.

Thank you again for contacting my office regarding this issue.

Glenn Richardson, Speaker Georgia House of Representatives