February 3, 2020

Legislative Session
Day 10
Report Snapshot

Alterations to the Teacher Retirement System Would Constrain Cost Growth and Future Educator Benefits - Action Alert

Senate Finance Committee Takes Steps toward Improved Fiscal Transparency

Register for PAGE Day on Capitol Hill
Upcoming Schedule

Tuesday, Feb. 4 - Legislative Day 11

Gov. Kemp Press Conference on Bill to Reduce High-Stakes Testing, 1:30 p.m.

House Retirement Committee, 2 p.m., 515 CLOB

Senate Regulated Industries and Utilities Committee (SB 298, a bill providing protections and education for minors regarding smoking and vaping, is on the schedule), 2 p.m., 450 CAP

Wednesday, Feb. 5 - Legislative Day 12

Senate Education and Youth Committee, 2 p.m., 307 CLOB

Thursday, Feb. 6 - Legislative Day 13
Alterations to the Teacher Retirement System Would Constrain Cost Growth and Future Educator Benefits 

House Bill 109, which would make changes to the Teacher Retirement System TRS), is being heard by the House Retirement Committee tomorrow. Please read the following bill analysis and contact members of the committee as encouraged in the Action Alert.

Bill Analysis: House Bill 109 LC 43 1437S

TRS is a vita benefit for Georgia educators. It ensures educators have a financially secure retirement after a career serving children and young people. This retirement benefit is a critical tool to attract and keep great educators in the classroom, which is an urgent need. The state loses more than 40 percent of new teachers within their first five years in the classroom, and every year there are unfilled teaching positions in schools across Georgia. There were 2,549 teacher vacancies in the 2017-2018 school year.
TRS is a defined benefit program that makes specific financial commitments to its members for their retirement years. It is funded through employer and employee contributions as well as investment returns. When the system’s liabilities outpace its assets, it has an unfunded accrued liability. Increases in life expectancy, lower-than -expected investment returns, the Great Recession and other factors created an unfunded liability for TRS in recent years. Legislators addressed this gap by increasing the state’s investment. The employer’s contribution rate, a major portion of which is covered by the state, climbed from 10.28 percent in fiscal year 2010 to 21.14 percent in 2020. Strong investment returns have resulted in a lower rate of 19.04 percent for fiscal year 2021. While there remains an unfunded liability, it is decreasing, and the TRS leadership team has implemented a plan to cover the liability in 25 years, ahead of its 30-year amortization schedule.
During the 2019 legislative session, lawmakers introduced House Bill 109, which , if approved, would make multiple changes to the structure of TRS. (The link to HB 109 is the most current written version but changes are expected. PAGE will post the updated version when it becomes available.) The changes would constrain cost growth as well as reduce benefits to future members. A proposed alteration to the cost of living allowance (COLA) would also affect current members who have not yet retired. TRS retirees who are already drawing benefits would not be affected.
Discussions about HB 109 are ongoing and, under the direction of Rep. Tommy Benton (R-Jefferson), chair of the House Retirement Committee, the bill continues to be refined. Chairman Benton, who is also the bill’s author, indicates that HB 109 will be discussed by the retirement committee at its Tuesday meeting but he will not hold a vote to ensure there is time for feedback from educators and other stakeholders. Communication with Benton indicates that the version of the bill summarized below is undergoing revisions.

HB 109 Expected to Reduce State Contributions to TRS

A 2019 study by the Georgia Department of Audits laid out a series of changes to components of TRS to reduce the growth of future costs. The cost reductions varied based on the specific component and the type of change proposed. HB 109 incorporates many of the recommended changes. A fiscal note for the specific changes outlined in HB 109 has not been completed, so possible savings to the state and lowered benefits to teachers and other TRS members has not been calculated.

Proposed Changes to TRS for New Members

HB 109 lays out an array of structural changes to TRS. If approved by legislators, these changes apply to individuals who are hired and become TRS members on or after July 1, 2020; the following proposed changes would not impact current TRS members:
  • Lengthen final average earnings calculation period. Under HB 109, the final average salary will be determined based on the five consecutive years of a highest salary. Currently it is based on two consecutive years of highest salary. Final average salary is a component of the benefit formula used to determine the amount each TRS retiree will receive. Increasing the number of years used in the calculation will result in a lower final average salary than many future TRS members would otherwise receive.

  • Increase allowable employee contribution rate. The cap on employee contributions would rise to 8.5 percent from the current 6 percent. The TRS board would set the specific rate. If set at 8.5 percent, the higher contribution level would reduce incoming teachers’ “take-home” pay and undercut the impact of the pay raise the General Assembly approved in 2019. The effect on teachers early in their careers is shown in the chart below.
  • Alter the normal retirement age. Members would be eligible to draw retirement benefits when their age plus years of creditable service equals 85 or they are 62 and have at least 10 years of creditable service. Currently members can draw benefits after 30 years of creditable service or they are 60 and have 10 years of creditable service. This shift would affect new teachers and other future TRS members differently depending on the age at which they are hired. Some will be able to draw retirement benefits at an earlier age than current practice while others will be delayed.

  • Exclude sick leave. Unused sick leave will not be included in the calculation of creditable service under HB 109.

  • Cap maximum annual benefit. The annual benefit retirees could receive would be limited to $200,000. This amount would be adjusted annually by 3 percent or annualized rate of inflation.

Proposed COLA Changes for New and Current Members 

HB 109 calls for changing how cost of living adjustments (COLA) are applied for current and future TRS members. The COLA would be applied annually and capped at three percent or the previous year’s annualized rate of inflation as determined by the TRS board. Under current practice, these adjustments are made twice a year if there is any increase in the Consumer Price Index from beneficiaries’ year of retirement. In practice, these adjustments have usually exceeded inflation. According to the analysis by the audits department , the TRS COLA has outpaced inflation in 21 of the 26 years prior to 2017.

Action Alert

Please contact the House Retirement Committee (emails listed below) now to express concern about HB 109. Contact your elected House member, as well, and use your home address to locate your representative’s contact info  HERE . As always, please contact policymakers using your personal (not school) email addresses and electronic devices, and remember to contact policymakers outside of instructional time. The most effective communication frames the impact of proposed legislation in a personal way that demonstrates its impact on students, educators, and school communities.

-Claire Suggs
Senate Finance Committee Takes Steps toward Improved Fiscal Transparency

The Senate Finance committee approved Senate Bill 302, a bill authored by Sen. John Albers (R-Roswell) that would create an evaluation process for state tax expenditures. These expenditures include tax credits, deductions, rebates and other mechanisms that reduce the state’s revenue. These expenditures are not currently evaluated. The cost of these expenditures top $5.9 billion annually according to a report from the Georgia Budget and Policy Institute.
Under the bill, the chairpersons of the Senate Finance Committee and the House Ways and Means Committee would each be able to request an analysis of up to five tax expenditures per year. The analyses would include any changes in state revenue and expenditures as well as other public benefits.
A 2017 Senate study committee examined how other states evaluate tax expenditures and found Georgia lags behind many. Ten states have evaluation frameworks in place and an additional 17 states were in the process of implementing them according to the committee’s final report.
The General Assembly approved a similar bill last year, which was vetoed by Gov. Brian Kemp. Under the earlier bill, Senate Bill 120, the analyses would be conducted by the Georgia Department of Audits. In his veto statement, Kemp indicated that the analyses should be carried out by an independent auditor. SB 302 includes this revision.
SB 302 now moves to the Rules Committee, which will determine when it come the full Senate for a vote.

-Claire Suggs
Register for PAGE Day on Capitol Hill

PAGE Day on Capitol Hill is Tuesday, Feb. 18. We’re pleased to partner with the Georgia Association of Educational Leaders (GAEL) and the Georgia Association of Colleges of Teacher Education (GACTE) again this year. Attendees will meet other politically minded educators from across the state and advocate for teachers and students under the Gold Dome. Please make your plans to attend and register HERE.

Claire Suggs
Senior Education Policy Analyst
Josh Stephens
Legislative Affairs Specialist
Margaret Ciccarelli
Director of Legislative Services