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$15 Billion Gone From Georgia’s Teacher Pension Fund System. Educators Concerned About Their Retirement

Georgia’s teacher pension fund system lost $15 billion in last year, but experts say educators shouldn’t panic.

The fund, which saw significant gains the year prior, reaching $102.2 billion, fell nearly 15% to close out the fiscal year 2021.

Troubling macroeconomic conditions have roiled U.S. stock markets, worsened by inflation soaring to a 40-year high in June and causing company shares across a variety of sectors to flash red consecutively for months. Investors have taken caution by turning to safe-haven assets to preserve capital gains. 

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Georgia’s Teachers’ Retirement Fund Investment Shakeup

Meanwhile, Georgia’s teachers’ pension fund held steady in stocks which it had benefited from, until recently. According to the Teachers Retirement System, in fiscal year 2019, the fund had $78.9 billion; the next fiscal year it had $81.2 billion. And then, in fiscal year 2021, it held $102.2 billion. However, for fiscal year 2022, which ended June 30, it had just $87 billion.

With the fund being heavily invested in equities, broad exposure has been depleting the system that former educators rely on as supplementary, or their only income stream in retirement.

“It has not been usual to see days when our fund has gone down by $4 billion, then up by $4 billion the next day,” L.C. “Buster” Evans, the executive director of the Teachers Retirement System of Georgia, told the TRS board back in 2020 when the fund tanked significantly at the onset of the pandemic.

The Risk Factor

“Depending on where a fund comes down on the acceptable level of risk tolerance is going to drive decisions regarding asset allocation, and those decisions are going to be different for different funds,” Alex Brown, research manager at the National Association of Retirement Administrators, told Finurah.

The retirement system sends checks to 133,000 retired educators each month and has lost $15 billion since the pandemic to the U.S. economy on its head and rattled global stock markets. The fund rate of return was down nearly 13 percent for the fiscal year ending on June 30, according to Brown. The annualized return for the fund ending in fiscal year 2021 was 29.2 percent.

But, with $91.9 billion in total assets in total assets under management, experts are reassuring Georgia teachers that their retirement benefits aren’t at risk.

Should Georgia Teachers Worry?

“Teacher’s pension plans are not monolithic — some are in better condition than others,” Brown said. “[Georgia] teachers’ benefits are safe and sound.”

Even so, developments of draining pension funds have Georgia teachers contemplating more about longevity in a public school system that is struggling to recruit and retain teachers amid COVID-19, rising cases of monkeypox in the Peach State, and stagnant wages that triggered a slew of resignations across the U.S. There were approximately 10.6 million educators working in public education in January 2020 — today there are just 10 million, a net loss of around 600,000, according to Bureau of Labor Statistics data.

The BLS Job Openings and Labor Turnover survey found that the ratio of hires to job openings in education reached new lows at the beginning of the 2021-22 school year. There are currently 0.59 hires for every open position, a significant decrease from 1.54 in 2010 and 1.06 in 2016. 

Recently, Georgia’s General Assembly passed a bill to launch a Return to Work program in hopes of luring in retired teachers with full pay and pension benefits to fill positions in critical areas of learning such as mathematics and in lower income neighborhoods.

“Initial utilization numbers are low,” said Margaret Ciccarelli, the director of legislative affairs at Professional Association of Georgia Educators (PAGE). “Because it’s brand new, we’re not sure yet why that is, but it’s something we’ll be exploring.”

To qualify for the program, teachers must be retired for more than a year and have up to 30 years of experience in the classroom. According to the Teachers Retirement System of Georgia, more than 56,000 retirees qualify but less than 100 reached out to TRS about returning.

“It’s a promising program that we hope more retired educators will take advantage of,” said Ciccarelli.

Georgia’s pension system payout is top tier compared to other teacher pension systems across the country, with an average benefit of about $40,000 a year. 

In addition to members of the Teachers Retirement System, receiving payments that are funded by a combination of employee contributions, taxpayer dollars, and other investments, The Atlanta Journal-Constitution reported that more than 200,000 teachers are guaranteed to receive benefits from the fund upon retirement.

In Georgia, besides the 133,000 members receiving benefits, the TRS promises retirement benefits to more than 200,000 teachers and University System of Georgia staffers in the future.

Pay Raises and Pension Reform

Democratic gubernatorial candidate Stacey Abrams proposed raising the base pay for teachers in Georgia from $39,000 to $50,000. With the midterm election inching closer, education reform and funding for pension systems have been key issues on the campaign trail. 

Meanwhile, minuscule returns from risky investments are forcing teachers to take more money from their paychecks and put it into individual retirement accounts.

Declining enrollment in public schools over the past couple of years has grave financial ramifications for school districts. School districts are typically funded on a per-pupil basis. While the funding per student has increased from $600 in 2002 to $1,200 in 2019, funding has been allotted to cushion retirement benefits due to outstanding pension debts. Consequently, that has meant less money in classrooms and for pay increases for teachers.

Some pension or public workers, including teachers, are at risk as the chatter of an impending recession becomes widespread on Wall Street. As state legislatures push to reform, or overhaul the pension systems entirely, it’ll continue to be on for prospective congressional candidates. 

“The topic of pension reform is never going to go away,” said Evans.

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