State Able to Save $17 Million Next Year

BATON ROUGE, LA – The state will spend nearly $17 million less over the next fiscal year to fund the state’s retirement systems, thanks to better-than-expected progress in reducing the systems unfunded accrued liability (UAL), announced State Treasurer John Kennedy.

Moreover, if investment returns continue to grow, millions of dollars more will be saved over the next three decades as state legislators will need to budget less money than originally projected to fund the state’s retirement systems, he said.

The state’s retirement systems include Teachers Retirement System of Louisiana, Louisiana State Employees Retirement System, Louisiana State Police Retirement System, and Louisiana School Employees Retirement System. Three of the four state retirement systems have an UAL. The Louisiana School Employees Retirement System does not have an unfunded liability; rather, it is over-funded by $250 million.

According to original projections, the three systems with unfunded liabilities were expected to have an $8.5 billion UAL by June 30, 1999. However, the actual unfunded liability for these systems as of June 30, 1999, is $6.0 billion, meaning the UAL has been reduced by $2.5 billion, or 29 percent.

Kennedy attributed the improved financial posture to a whopping $2.714 billion in investment gains above projected returns. The systems also benefited from the Texaco litigation settlement by $0.389 billion.

The latest figures demonstrate that the state’s retirement systems are in much better fiscal shape than we expected at this point in our long-term effort to eliminate the UAL. That’s good news for our employees, retirees and our taxpayers, Kennedy said.

A constitutional amendment passed in 1987 guarantees annual payments by the State Legislature to the four state retirement systems sufficient to meet each systems normal costs, plus annual amortization payments to pay off those systems with unfunded liabilities by the year 2029. The original amortization schedule was based on projections from June 30, 1989.

The Public Retirement Systems Actuarial Committee, composed of the State Treasurer, Commissioner of Administration, Senate President, House Speaker and four actuaries, recommends to the State Legislature the amount needed to be paid to the retirement systems each year. State Treasurer Kennedy chairs the committee.

Kennedy said payment schedules are revised annually to reflect the financial status of the systems, and the state will have to pay less in years to come than originally expected to amortize the UAL because of the better-than-expected progress at this point.

In particular, for fiscal year 2000-2001, the state’s recommended contribution to Teachers Retirement System of Louisiana will be 1 percent less 14.2 percent, as compared to 15.2 percent in fiscal year 1999-2000 and payments to the Louisiana State Police Retirement System are recommended for a 7.7 percent reduction, dropping from 63.5 percent to 55.8 percent. The State Employees Retirement System is slated for a slight rate increase, while the Louisiana School Employees Retirement System will remain the same.

The combined rate changes are expected to save the state as much as $17.3 million during the 2000-2001 fiscal year, said Kennedy.

Kennedy praised the retirement systems directors, Patrick Cosper of Louisiana School Employees Retirement System, Glenda Chambers of State Employees Retirement System, Walter Smith of Louisiana State Police Retirement System, and James P. Hadley, Jr., of Teachers Retirement System of Louisiana, for fiscally sound management of their respective systems.

Contact:
Delia Taylor, Communications Director
(225) 342-0010