Senate panel endorses change to pension funding

Louisiana school executives pleaded for financial relief Monday as a Senate panel endorsed a pension system change that would cost school systems an additional $18.8 million annually.

The change proposed in Senate Bill 26 would require schools to pay up front for the administrative costs involved in the Teachers’ Retirement System of Louisiana and the Louisiana School Employees’ Retirement System.

The systems’ administrative expenses are amortized over 30 years, a practice that began in 1990. The method ends up costing a lot more because of interest payments.

Actuary Charles Hall said the change will bring the state’s four retirement systems into compliance with “best practices.” Besides Teachers’ and School Employees’, the Louisiana State Employee and State Police Retirement Systems would be included.

Hall said there would be an immediate increase in employer contributions but there would be interest savings as old expenses go off the books.

“It increases costs to school districts struggling to meet costs already,” said Scott Richard, executive director of the Louisiana School Boards Association.

St. Charles Parish schools comptroller Jim Malone said paying annually for administrative expenses would increase school system contributions to the Teachers’ system by $16.8 million. An additional $2 million annual increase to the School Employees’ system also would be required, he said.

Bill sponsor state Sen. Elbert Guillory, R-Opelousas, said, “the door is definitely still open” for ways to mitigate the expenses.

Sen. Conrad Appel, R-Metairie, said the issue raised by the school system executives “raises our concerns. On the other hand, good business practices dictate that we should do this.”

The panel advanced the bill, without opposition.

SB26 next will be heard by the Senate Finance Committee because of its impact on the state budget through increased state contributions to the State Employees and State Police pension plans.

Later Monday, the full Senate approved another bill, SB14, related to school employee pension system finances that would put yet more expense on the school boards.

The Senate voted 38-0 for the measure, which would reamortize $905.69 million in system long-term liabilities on a level payment basis over 30 years so school boards would not be facing major payment spikes down the road.

That bill moves to the House for consideration.