Could Arkansas’ efforts to strengthen a program serving 43,000 retirees offer an example for Congress to fix programs serving 60 million?
During this past legislative session, Arkansas lawmakers took steps – baby steps for sure, but steps – that might shore up the state’s Teacher Retirement System. Actuaries had determined it would take the system 29 years to catch up with the payments it will make to current and future retirees, and that’s too much. In the past, 30 years was considered acceptable, but the Government Accounting Standards Board has lowered that number to 18. Anything longer risks hurting the state’s bond rating and increasing the borrowing costs for schools and roads.
Because big fixes are hard, the system’s managers requested the flexibility to implement numerous little ones. Laws passed this session let the system’s board of trustees increase the rates paid by school districts and by current teachers if the projected payoff exceeds 18 years. Various retirement benefits could be reduced, and the system will be funded by school districts employing contracted employees working for private providers.
In other words, the Teacher Retirement System is not meeting professional standards meant to assure long-term survivability. So in response, the Legislature gave a governing entity the flexibility to make changes, rather than doing it in the politically charged halls of the State Capitol, where laws can be hard to pass and harder to change.
It remains to be seen if the changes will work. It could be that the state’s retirement systems need bigger fixes. The…
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