Joint Public Retirement update
LITTLE ROCK – More than 2,000 people attended a series of meetings that the legislature’s Joint Committee on Public Retirement held in 11 cities across Arkansas earlier this fall.
Estimates are that about half of those in attendance were members of the state Teacher Retirement System.
Many of them expressed concerns about changes approved in 2017, which retirement officials concede were the result of difficult decisions. Retired teachers are living longer, so the system can expect to pay out more in lifetime benefits.
Also, the return on the system’s investments could no longer be maintained at 8 percent. When the assumed rate of return was lowered to 7.5 percent, it necessarily meant a lengthening of the system’s period of unfunded liability.
Another change made in 2017 was to lower a benefit stipend from $75 to $50 a month. That took effect last July. There was no change to the cost of living adjustment of 3 percent a year. According to the director of the Teacher Retirement System, no changes are expected in the foreseeable future in either the stipend or the COLA.
The Arkansas retirement system is 80 percent funded, which is better than the national average of 72 percent. The amortization period is 28 years. Retirement experts recommend keeping the period below 28 years, and the Arkansas system is aiming for 18 years.
The market value of the system’s assets, as of June 30, was $17.6 billion, compared to $16.7 billion on June 30, 2018.
A question asked during the committee meetings was whether to expect legislators to try to merge the various public retirement systems. The audience was told that no bills have been filed or proposed. Arkansas has a separate retirement system for judges, state employees, highway department employees, police and firefighters.
As of September, the teacher system was paying monthly benefits to about 50,000 retirees. Their annual benefits are a significant contribution to the local economies of Arkansas cities and towns, because they receive a total of about $1.2 billion a year.
According to a presentation made at a recent Board of Trustees meeting, their average annual benefit is $23,558.
Of the retirees, 28 women and three men were older than 100. There were 976 retirees between 90 and 99 years old, of whom 803 were women and 173 were men. The oldest retired teacher is a woman who is 108 years old.
For the first five months of the current fiscal year, the state’s net general revenue is up 4.5 percent over the same period last year.
One contributor to the healthy increase was personal income tax collections. They were up 5.9 percent, which means more people are working and getting paid more.
Another factor has been an increase of 3.1 percent in sales tax collections, which means people are spending more.
Revenue forecasts are used to set budgets for state government agencies. So far this fiscal year, revenue is 3.8 percent above official forecasts.
November was a good month for the Arkansas economy, judging by revenue statistics. Net general revenue for November was 6.1 percent more than last year and 3.7 percent above the forecast.