Retirement flap pits education groups against auditor

Officials of seven influential education groups said Wednesday local school districts will face a $95 million charge if the state adopts retirement changes Thursday recommended by Legislative Auditor Daryl Purpera.

Scott Richard, executive director of the Louisiana School Boards Association, said the unexpected expense could trigger school layoffs and result in fewer teachers and more crowded classrooms. “It would result in some drastic measures,” Richard said.

Districts that would face the biggest increases include the East Baton Rouge Parish school system, $5.8 million; Jefferson, $7.5 million; St. Tammany, $5.3 million; and Lafayette, $6.9 million, according to Richard’s figures.

Purpera said his changes would help ensure the stability of a retirement system that already carries an $11 billion debt.

“We are making promises that we want to make sure we can keep,” he said.

The issue is scheduled to come to a head Thursday at 1:30 p.m. before the little-known Public Retirement Systems’ Actuarial Committee.

That panel is supposed to decide whether to adopt retirement assumptions of Purpera or less draconian adjustments backed by the Teachers’ Retirement System of Louisiana, which the Louisiana School Boards Association and six other education groups back.

That list includes the Louisiana Federation of Teachers, Louisiana Association of Educators, Louisiana Association of School Superintendents, Louisiana Association of Principals, Louisiana Association of School Executives and the Louisiana Association of School Business Officials.

At stake is the health of a retirement system — largest in the state — that includes 186,755 members, including about 75,000 who are retired.

In dispute is whether the Teachers’ Retirement System plan is overly optimistic in projections on how much income the system will generate yearly on assets.

The current rate is 7.75 percent.

The new rate under the Purpera plan would be 7.4 percent, officials said.

As a result, the contribution by local school districts — in this case, the employer — would have to rise to make up the cut in projected earnings.

In an interview, Purpera compared the problem to a homeowner failing to pay enough on his mortgage, which then back loads the problem.

“I understand the school groups,” he said. “But what we have to be careful with is that you are not shortsighted with it.”

Leaders of school groups said the changes would be ill-timed, especially since the state faces a $2.7 billion shortfall in the next 18 months.

State aid for the 2016-17 school year is uncertain.

“I think the biggest thing is there are so many budget issues right now that one more budget problem for a local district to have to jump over is going to be the one that breaks their back,” said Debbie Schum, executive director of the Louisiana Association of Principals.

Steve Monaghan, president of the Louisiana Federation of Teachers, said changes recommended by Purpera would mean “instability and harder times ahead.

“So we are asking the governor and anybody who will listen, starting with the actuarial committee, hold off,” Monaghan said.

Hollis Milton, president of the Louisiana Association of School Superintendents, said the district he heads — the West Feliciana Parish school system — would have to come up with an extra $375,000.

“The legislative auditor’s recommendations would be devastating to many districts,” Milton said in an email response to questions.

Purpera said the Teachers’ Retirement System is 61 percent funded now, which means “you probably barely have enough assets to pay the current retirees.”

He said the law requires realistic financial assumptions “so that when a teacher retires there is actually money in the bank.

Follow Will Sentell on Twitter @WillSentell. For more coverage of Louisiana government and politics, follow our Politics blog at http://blogs.theadvocate.com/politicsblog/

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