During last year’s legislative session, Georgia’s House Retirement Committee requested cost estimates of House Bills 662 and 667 (as amended)—both measures propose changes aimed at improving the solvency of the Teachers Retirement System (TRS) of Georgia, a plan currently sitting at only 77 percent funded and holding nearly $22 billion in unfunded promises made to Georgia educators.
Since the fiscal impacts will likely drive the committee’s deliberation on these bills in the upcoming legislative session, understanding the bills’ short-term costs along with their potential long-term benefits is critical to fully evaluating these reforms.
Actuarial modeling performed by Reason Foundation’s Pension Integrity Project—calibrated and confirmed by an internal short-term actuarial study prepared for Georgia’s House Retirement Committee—provides some insight into the long-term impact of the proposed legislative changes.
The two bills address Georgia’s Teachers Retirement System challenges in different ways:
- HB 662 would lower the assumed rate of return (ARR) for the Teachers’ Retirement System from 7.25 percent to 6.75 percent.
- HB 667 would require all current legacy unfunded liabilities to be paid off by 2037, and put all new unfunded pension liabilities accrued in any given year on a 15-year amortization (e.g., “pay down”) schedule instead of the current 30 years.
- Both bills would accelerate the frequency of internal Teachers’ Retirement System actuarial experience studies from the current every five-year review to a look back every three years.
Both changes would result in higher annual contributions into the system in the short-run, but for that cost Georgians would enjoy a more stable retirement system, both in future contributions and overall retirement security for members.
Read the rest of this analysis here.
This article republishes selections from “The Impacts of Proposed Changes to Georgia’s Teacher Retirement System,” a report by Jen Sidorova for the Reason Foundation, February 18, 2020.