Education Spending Consumes New State Revenues
This week’s Courier Herald column:
On Friday, Georgia’s House of Representatives passed the proposed budget for Fiscal Year 2019, which begins July 1 of this year. Appropriations bills begin in the House under the stewardship of Chairman Terry England – a man who has learned to listen attentively and smile before saying “no” to many wish lists. After all, a $2.5 Billion rainy day fund doesn’t come about by a frequent habit of making it rain upon request.
This year’s proposed budget is $26 Billion, $1.03 Billion higher than FY 2018’s budget. This will renew the annual chestnut that we have a “one-billion-dollar surplus”, already being used by campaigns that hope you don’t understand Georgia’s budget process. For perspective, that’s 4% larger than last year’s budget. Given that the state is growing at about 1% population growth and consider inflation at 2-3% and a 4% growth is essentially holding at status quo.
That billion dollars doesn’t get spent with line items rising 4% across the board however. In fact, education will get 90% – 9 of every 10 dollars – in year over year revenue growth.
Expect quite a few headlines this year about teachers not getting pay raises. Teachers instead are getting a huge injection into the Teachers Retirement System to keep it within acceptable reserve standards. $361 Million will be injected into TRS this year alone.
The above paragraph should actually say “some teachers”, as Georgia’s teacher retirement system requires ten years to vest in the program. According to an August piece by Kyle Wingfield of the AJC, only one in 3 teachers break even with their contributions to TRS, with 4 of 5 expected to lose money on their contributions to the system.
For the defenders of the status quo education system, it needs to be pointed out repeatedly that the system is designed to reward career educators at the top end of the pay scale. At the same time, the system churns through lower paid entry level teachers who leave before being able to take full advantage of the system they contribute. Those who still say teachers are being short changed in this state need to ask the career education bureaucrats why they maintain a system that works for them, and leaves out more than two thirds of classroom teachers.
Recommendations from the House Rural Development Council were also incorporated into the House Budget, with 52 separate line items added or increased due to recommendations from the RDC. Many of these amounts are healthcare and/or mental health related, with increases to provider reimbursement rates and/or additional funding for services scarce in rural Georgia.
Transportation continues to get additional funding in the form of bonds, including $100 Million for the 4th year in a row for bridge and road repair. Additionally, $5.5 million will go toward upgrades for state owned short line railroads, and $35 Million is dedicated toward deepening the harbor for the Port of Savannah.
More than a half billion dollars is headed to the University System of Georgia under this budget. $111 Million is allocated based on enrollment growth. The largest part of this year’s bond package ($417 Million) is dedicated to construction projects for the USG. Other highlights from this section of the budget includes $4.4 Million to staff the Georgia Cyber Innovation and Training Center in Augusta, and $1.7 Million for the Center for Rural Prosperity and Innovations.
Other budget items see increases for programs in public safety, including additional funding to create accountability courts and to fund an additional school of state trooper cadets. An additional $6 Million is also added to the state’s public defender council.
The budget will now go to the State Senate where Senate Budget Chairman Jack Hill will shepherd a similar sized budget reflecting slightly differing priorities. The respective differences will be ironed out in a conference committee and then settled in a final budget before the legislature adjourns on March 29th.
About Author
Charlie
Founder of GeorgiaPol.com; Now weekly columnist Very interested in Georgia and Georginas. Interest in politics is waning daily.
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It’s been suggested that the state offer a portable 401k type option to teachers. While this might be more attractive to some teachers, I don’t see how it helps the state funding situation at all. In fact, if 4 out of 5 teachers aren’t even getting out what they contribute, it seems like taking those overpayments out of the budget would be a big problem.
Also, if 4 out of 5 teachers pay in more than they take out, and the stock market has risen by 300% since 2008, how can the system not be sustainable?
I don’t know how the Georgia system is structured. I can give you a reason why the trust might not be sustaining itself using a different state as an example. The Wisconsin system (which I know very well as I handle mom’s retirement funds for her) is set up with 2 different sections in the trust, the actual retirement payouts and the insurance payouts.
The deposited payout is based on 2 elements – the contact amounts (vary pre-person) which can’t be touch unless you put in your years served, retire out under a disability or you pass away while employed with the payment going to your minor & college children if in the UW system (sort of like SSI). Additionally there is the annuities each teacher could add to the trust of their own personal funds or as part of their local contracts when collective bargaining was still a thing in Wisconsin. You can pull the annuities at retirement and roll it over into a IRA This section of the Trust is extremely stable and has a yearly payout adjustment based on the no. of people and their contracted amounts with in a set range. Most years my mom’s payment increases. In 2012 it went down after any teacher or staff member who could retired so not to lose collective bargaining agreements.
The insurance section is not as sustainable. By Wisconsin state law, whatever insurance you offer teachers the system staff has the same policy, be it superintendent or 1st year cook. A retiree under 65 gets the same policy, which the trust covers well over 80% of the cost, unless your district had a different set of contract agreements (my mother’s did – it covered full cost). At 65, you are on your own, but can buy additional coverage directly from the trust. My mom buys the post 65 policy they offer, and it covers almost everything Medicare does not, including dental. The state has had to add funds to the insurance section of the Trust in Wisconsin.
When the Wisconsin system was set up most teachers worked till 60-65. and had lower life expectancies. Boomers started entering the retirement trust at 55 year olds in 2001, so the insurance section took a pounding over the years.
From what I read it seems as if most teachers are dead set against any type of 401K option. Teacher organizations appear to want the state to maintain the traditional “defined benefit” system that is currently in place. The argument is that any other type of retirement system will not attract and keep good teachers. I think the reality is that new teachers who sign on to a 401K system would not be contributing to the “defined benefit” system, thereby not supporting the system that serves current retirees and teachers. Old teachers and retirees see this as a threat to their system. I guess the fact that the legislature has for two years now injected a massive payment to TRS so these members can continue to receive their 3% per years COLAS isn’t enough to stop the whining.
A bit of misinformation above. Actually, if you leave TRS before you vest, you get all you contributed back. There has been an issue of underfunded pensions all across the country. They would rather give tax cuts to companies like Gulfstream or Kia than fund employee retirement plans. BTW, they are not getting 3% COLAs every year.