On Monday 5/18 Sen. Adley will offer a substitute bill to his SB 18 in the Senate Retirement Committee that will propose to shift Unfunded Accrued Liability (UAL) payment costs from Higher Education to K-12 school systems. This dangerous idea will cause local school boards to have increased employer contributions to TRSL, depleting resources for classroom instruction and resources for local school boards, and likely leading to higher local taxes to replace funding siphoned off by this bill. The move would break agreements that have been in place for more than 25 years that base employer costs on a percentage of payroll, rather than liabilities created by the split groups of Higher Ed vs. K-12. Ultimately, this measure doesn't address the real, underlying problem: Louisiana has cut higher education more than any other state. Rather than punishing K-12 to benefit the higher ed budget, legislators must prioritize higher ed funding to meet their obligations and keep their promises.
Some problems with the substitute bill are as follows:
- The State's UAL payments to TRSL are designed to be shared among all participating employers and paid as a percentage of payroll. (La. R.S. 11:102 & 11:927) But, with the creation of the Optional Retirement Plan (ORP) in 1989 (Act 90), the payment method remained the same.
- UAL payment method provided for equity among ALL TRSL employers. Based on this method, higher education pays its appropriate share. Higher makes up 25% of payroll, while K-12 makes up 75% of payroll.
- SB18's proposed substitute bill would shift more than $83 million annually in retirement liability from higher education to K-12. This cost shifting scheme would increase the K-12 employer contribution rate by more than 2.5% annually, beginning July 1, 2015, forcing already budget strapped K-12 school districts to cut vital services to students, like teaching positions.
- Proponents of SB 18's substitute bill claim that Higher Education has been and is currently subsidizing K-12 when it comes to retirement liability. To the contrary, K-12 systems have been participating and paying into the TRSL since 1936 and make up 75% of payroll, while the LSU system has only been participating and paying in since 1979 and only makes up 25% of payroll.
- 25 years ago, there a contract was formed which requires every employer pay by % of payroll. This is fair since the passage of ORP let higher ed divert people out of the Defined Benefit plan. Breaching that agreement amounts to breaking a promise to the people of Louisiana, and the members of TRSL.
- The proposed arbitrary allocation of shared assets to each group of employers 79 years into plan's existence raises serious concerns about the overall effect on the health and longevity of the retirement system.
Click the button below to contact the members of the Senate Retirement Committee and ask them to VOTE NO on SB18, and seek real solutions to fund Higher Education!