About 50,000 Georgians will receive bonuses of up to $1,200 after the Employees Retirement System board backed a request from state lawmakers.
While appreciated by state retirees, the bonuses fall short of the former workers’ ultimate goal — to get a cost-of-living raise for the first time since the Great Recession.
The difference in not getting a COLA — like the ones retired teachers and university staffers receive — is significant. A $30,000 pension in 2009 would be worth about $40,300 next year if ex-state workers had gotten the same cost-of-living raises as Georgia’s retired educators.
Still, Chuck Freedman, a former state budget official who sits on the Georgia State Retirees Association board, said his group appreciates the ERS board for granting the bonuses and the General Assembly for recommending something be done to boost payments to retirees.
“We were disappointed that there was no money in the governor’s budget (recommendation) for increases for either active employees or retirees,” Freedman said. “That certainly made it difficult for the General Assembly to put money in there.”
Gov. Nathan Deal’s budget proposal this year did not include pay raises for 200,000 teachers and state workers, nor did it include extra money for retired state workers. It did contain $361 million to strengthen the financial position of the Teachers Retirement System, the second major infusion of cash in that pension system in two years.
The employee contribution rate for the TRS is higher than for state workers, and teachers typically receive twice-annual 1.5 percent COLAs to boost their pensions.
The ERS system must rely on state officials and the current soundness of the system for COLA money.
Jim Potvin, the executive director of the ERS, said the system ended the most recently completed fiscal year with 74.7 percent of the money needed to pay future benefits. That’s about 5 percentage points below the TRS’ ratio.
Pension experts typically call plans with at least 80 percent of assets needed to pay benefits relatively healthy. However, many state and local public pension systems are well below that rate and face serious financial challenges to remain solvent and pay benefits in the future.
Instead of giving COLAs, which are permanently built into the retiree’s pension, lawmakers the past few years have backed one-time bonuses. That way the system sends an extra check or two, but the pension — and the ERS’ annual liability — remain the same.
While Deal’s budget didn’t include any money for bonuses, the Georgia House, in its version of the spending plan for fiscal 2019, requested one. The Senate opposed the House, arguing that state employees and teachers weren’t getting a raise. But in the final version of the budget that passed the General Assembly on the final day of the 2018 session, lawmakers wrote, “Urge the (ERS) board to consider a benefit adjustment for retired state employees in accordance with sound actuary principles.”
Potvin said retirees would receive extra checks of up to $600 on July 1 and Jan. 1.
Freedman, who lobbies the General Assembly for the retirees association, said his group would work over the next few months to persuade the ERS board to request money for a cost-of-living raise in the fiscal 2020 budget.
“Given that there was no money put in the budget (this year) to include COLAs, we weren’t surprised they did not do that this year,” he said. “We’re hopeful in the future they will move ahead on some kind of COLA.”
The retirees association has gotten support from retired teacher groups and organizations such as TRAGIC, which was initially formed to fight for better health insurance for teachers, state workers and retirees.
In turn, all the groups have been leery of changes proposed in recent years to retirement programs, something that is becoming an annual legislative discussion.
This session a retiring former House Retirement Committee chairman, state Rep. Howard Maxwell, R-Dallas, filed legislation to limit cost-of-living raises to retired teachers and university employees.
The bill got a hearing but not a vote. Maxwell and the chairman of the panel said the state may eventually have to offer 401(k)-type funds instead of pensions to new teachers. State employees hired after Jan. 1, 2009, are already in a hybrid plan that includes a 401(k).
After two budget cycles in which the state had to pump nearly $600 million in extra funds into the TRS, some legislators say future lawmakers will have no choice.
“If we are not proactive on this,” said House Retirement Chairman Paul Battles, R-Cartersville, “we will obviously have to make some hard decisions.”
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