Teachers' Retirement System - 2000 Legislative Recommendations

2000 Legislative Recommendations

General Goals

Maintain the minimum funding schedule as provided in 70.S. §17-108.1, and 68 O.S. §§ 1353, 1403 and 2352.

Provide funding to local employers to fully implement the financial obligation of 70 O.S. § 17-108.1, which requires local school district to contribute a percentage of employee's pay.

Provide additional funding to retire the System's unfunded liabilities over a shorter period of time.

Fund any benefit increase improvements over period consistent with standard actuarial assumptions.

Title 70 O.S §17-108.1 sets the annual contribution level local school districts must remit to the Teachers' Retirement System in the form of employer contributions. During FY-2000, schools contributed 4.8 percent of employees' pay. Beginning FY-2001, schools will be required to remit 5.8 percent of employees' total pay. Local contributions will increase to 6.8 percent in FY-2002 and 7.05 percent for FY-2003 and thereafter. Contributions from local schools will increase by approximately $27 million per year for each on percentage increase in the contributions rate.

Beginning July 1, 1999, the state's contribution to fund the Teachers' Retirement System, (68 O.S §§ 1353, 1403 and 2352) provides Teachers' Retirement with 3.54 percent of state revenues from sales and use taxes and individual income taxes. This is a change from the 40-year tradition of TRS receiving a portion of the severance tax on natural gas. The new funding schedule has the effect of providing smaller annual contributions to fund the System's actuarial liabilities. While this change will help state and local schools meet their portion of the total obligations to properly fund the Retirement System, it also extends the funding period to the year 2033, an increase of 17 years. The state can save millions of taxpayer dollars by systematically increasing the annual contributions to pay-down these obligations over a shorter period.

Specific Recommendations

Properly fund the existing obligations of the Retirement System as provided by current statutes.

Provide a means of systematically increasing state contributions in order to amortize unfunded liabilities over as short a time period as possible by:

Dedicating a percentage of available funds in the state's Rainy Day Account to be appropriated to the Teachers' Retirement System.

Dedicating a portion of any windfall revenue received by the state to TRS, such as funds from the tobacco case settlement.

Earmark a percentage of growth revenue available to the General Revenue Fund to the Teachers' Retirement System to pay for benefit increases, i.e. COLAs insurance, etc.

An additional annual contribution of $10 million would result in a $1.13 billion accumulation in 30 years. Annual contributions of $25 million would result in a $2.8 billion increase in TRS assets.

Adopted December 15, 1999