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All GSRA Members and other friends,
We are nearing the mid-point of the 2008 Legislative Session. It is critical that we be very vigilant for the last half of the Session. More importantly we need to remind our Representatives frequently of our concerns.
The most pressing issue facing retirees this session is Senate Bill 80. This bill passed the Senate in 2007 and now rests in the House Retirement Committee, awaiting passage. You will remember this as the “alternative investment” bill. It basically allows for the investment of pension assets in several different instruments that are not currently allowed. Those instruments are arguably ones that carry more risk than the ones the system is currently allowed to invest in by law.
The proponents of SB 80 tell us that there is a potential for much greater returns than we can expect with the current instruments. What they continually fail to mention is that there is an equal potential for loss. The rule in the world of investments is “RETURN IS A FUNCTION OF RISK.” The return the system realized last year on the total portfolio was over 14%. Improving on that return without exposing the system to dangerous levels of risk will be difficult if not impossible.
In the February 6 House Retirement meeting, SB 80's author, Senator Judson Hill, explained that the bill specifically excluded the Teachers' Retirement System from its provisions. His explanations included a personal reason for excluding the TRS, in that he stated that, “I have seven teachers in my family so I do not want to do something to hurt my mother who is a retired teacher”!!
The most disturbing provision of SB 80 is that it prohibits adequate and proper disclosure of the investments made, even years after the fact. GSRA favors more transparency in the disclosure provisions.
In recent months, however, another reason for SB 80 has surfaced--investment flexibility. This means that adding the ability to invest in alternative financial instruments is needed to increase investment income which will improve the pension funded percentage back to 100% from the current 94.5%.
This drop in funded percentage is being given as the reason for reducing the January 1st cost-of-living increase by two-thirds--to .5%. In recent months various proponents of the bill state that increasing investment income is the only acceptable method to fully fund COLAs, the other options being to increase the employee contribution rate (which GSRA opposes) and/or returning the employer contribution rate from its present arbitrarily low rate of 10.41% to its historically higher rate of at least 14.5% (which GSRA advocates). So, to fully fund the same percentage COLA for state retirees as other state sponsored pension plans enjoy, SB 80 supporters say ERS must "take off the handcuffs" and "use all the tools in the toolbox."
If you are concerned about SB 80, you should contact your representative and the members of the House Retirement Committee to voice your opinion. Our Representatives must know how we feel about certain legislation so that they can represent the desire of the citizens of the State of Georgia.
When you contact Legislative Members about SB 80, you may also want to voice your opinion about increasing the employer’s contribution rate back to its FY 2000 rate of 14.5% which should adequately fund retirement benefits and COLAs.
As you probably know, there is an increased number of pensioners but the primary reason for the decreased funded percentage from 104% in FY 2000 to 94.5% in FY 2007 is the FY 2001 employer rate decrease from 14.5% to 10.41%. You should also remember that failure to provide the same percentage COLA increase to all state-sponsored pensioners creates a glaring inequity--especially in the face of a 10% increase in health insurance premiums on January 1, 2008 and a proposed average increase of 7.5% in health insurance premiums on January 1, 2009--not to mention the inflationary increase of other goods and services.
IF YOU ARE CONCERNED ABOUT THESE ISSUES, YOU SHOULD CONTACT YOUR REPRESENTATIVE AND THE MEMBERS OF THE HOUSE RETIREMENT COMMITTEE IMMEDIATELY AND FREQUENTLY--UNTIL THE END OF THE LEGISLATIVE SESSION.
Click here to view and hear Senator Judson Hill's 30-second statement.
For suggestions about Contacting Your Legislators
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