2014 REGULAR SESSION
ACTUARIAL NOTE HB 44
Page 1 of 3
House Bill 44 HLS 14RS-445
Original
Author: Representative J. Kevin
Pearson
Date: April 4, 2014
LLA Note HB 44.01
Organizations Affected:
Teachers’ Retirement System of
Louisiana
OR -$756,394,593 FC LF EX
The Note was prepared by the Actuarial Services Department of the Office of the
Legislative Auditor. The attachment of the Note to HB 44 provides compliance
with the requirements of R.S. 24:521.
Bill Header: RETIREMENT/TEACHERS: Requires application of minimum foundation program formula funds to the unfunded
accrued liability of the Teachers’ Retirement System of Louisiana
Cost Summary:
The estimated actuarial and fiscal impact of the proposed legislation is summarized below. Actuarial costs pertain to changes in the
actuarial present value of future benefit payments. A cost is denoted by “Increase” or a positive number. Savings are denoted by
“Decrease” or a negative number.
Actuarial Cost/(Savings) to Retirement Systems and OGB $0
Total Five Year Fiscal Cost
Expenditures $(3,781,972,965)
Revenues $(3,781,972,965)
Estimated Actuarial Impact:
The chart below shows the estimated change in the actuarial present value of future benefit payments, if any, attributable to the
proposed legislation. A cost is denoted by “Increase” or a positive number. Savings are denoted by “Decrease” or a negative number.
Present value costs associated with administration or other fiscal concerns are not included in these values.
Increase (Decrease) in
Actuarial Cost (Savings) to: The Actuarial Present Value
All Louisiana Public Retirement Systems $0
Other Post Retirement Benefits $0
Total $0
Estimated Fiscal Impact:
The chart below shows the estimated fiscal impact of the proposed legislation. This represents the effect on cash flows for
government entities including the retirement systems and the Office of Group Benefits. Fiscal costs include estimated administrati ve
costs and costs associated with other fiscal concerns. A fiscal cost is denoted by “Increase” or a positive number. F iscal savings are
denoted by “Decrease” or a negative number.
EXPENDITURES 2014-15 2015-16 2016-17 2017-2018 2018-2019 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds (756,394,593) (756,394,593) (756,394,593) (756,394,593) (756,394,593) (3,781,972,965)
Annual Total $ (756,394,593) $ (756,394,593) $ (756,394,593) $ (756,394,593) $ (756,394,593) $(3,781,972,965)
REVENUES 2014-15 2015-16 2016-17 2017-2018 2018-2019 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds (756,394,593) (756,394,593) (756,394,593) (756,394,593) (756,394,593) (3,781,972,965)
Annual Total $ (756,394,593) $ (756,394,593) $ (756,394,593) $ (756,394,593) $ (756,394,593) $(3,781,972,965)
2014 REGULAR SESSION
ACTUARIAL NOTE HB 44
Page 2 of 3
Bill Information:
Current Law
Under current law, the Louisiana Department of Education (LDOE) supports public elementary and secondary education through
the Minimum Foundation Program (MFP). Each local school board combines its MFP allocation with its other revenues.
Employer contributions to the Teachers’ Retirement System of Louisiana (TRSL) are paid from total revenues of each individual
school district. These contributions are generally remitted to TRSL on a bi-weekly, bi-monthly, or monthly basis.
Proposed Law
Amortization costs are shared between K-12 public schools and higher education. Under HB 44, the LDOE will deduct 100% of
K-12 employer contributions associated with all unfunded accrued liabilities from the total MFP grant before it is allocated to
individual school districts. The LDOE will send this amount directly to TRSL. TRSL will reduce the employer contribution rate
for K-12 to reflect this direct payment by the LDOE.
HB 44 specifies that for the purposes of GASB 68, the state will by a non-employer contributing entity. The state will actually be
a non-employer contributing entity with a special funding situation. Therefore, for accounting purposes, the UAL will be treated
as a liability of the state. However, although HB 44 will require the state to make contributions to TRSL on behalf of school
districts and must record a liability for the UAL, the bill provides that it does not assume any legal liability for the unfunded
accrued liability of the retirement system beyond that which is already specified in the Louisiana constitution.
Implications of the Proposed Changes
If HB 44 is enacted, K-12’s portion of all amortization payments will be paid directly by the LDOE instead of individual school
districts.
Cost Analysis:
Analysis of Actuarial Costs
Retirement Systems
HB 44 has no effect on future benefit payments or on the actuarial present value of future benefits.
Our analysis of HB 44 is summarized below.
1. TRSL’s total amortization payment for FYE 2015 is $1,011,853,415. K -12’s portion of the payment is
$756,394,593.
2. The projected payroll for K-12 for FYE 2015 is $3,332,248,390.
3. If LDOE pays K-12’s portion of the total amortization payment, the employer contribution rate applicable to school
districts would decrease 22.6992%. The 28.0% employer contribution rate for K-12 teachers would decrease to
5.3% of pay.
HB 44 could potentially shift a portion of amortization costs from school districts to charter schools. Charter schools receive
revenue from the MFP. Taking amortization payments directly from the MFP will reduce the amount that may be left to
spread among all schools including charters. This shift will occur if the proportionate share of each school after the
deduction of the amortization payment remains the same as the proportionate share before such deduction.
Other Post-Employment Benefits
There are no actuarial costs or savings associated with HB 44 for post-employment benefits other than pensions.
Analysis of Fiscal Costs
HB 44 will have the following effects on cash flows during the five year fiscal cost measurement period.
Expenditures:
1. Expenditures from the General Fund will not change. A portion of MFP funds that would otherwise be paid to
school districts would be paid instead to TRSL
2. Expenditures from the General Fund relative to higher education would not change. The employe r contribution
rate applicable to higher education will not change.
3. Expenditures from TRSL (Agy Self -Generated) will not change.
4. Expenditures from Local Funds will decrease $756,394,593 a year. School districts will no longer be
responsible for paying toward amortization costs.
2014 REGULAR SESSION
ACTUARIAL NOTE HB 44
Page 3 of 3
Revenues:
1. TRSL revenues (Agy Self-Generated) will not change. Employer contributions that would otherwise be
collected from school districts will instead be collected from the LDOE.
2. Local Fund revenues will decrease $756,394,593 a year. MFP payments to local school districts from the
LDOE will be reduced by $756,394,593 a year.
Actuarial Data, Methods and Assumptions
This actuarial note was prepared using actuarial data, methods, and assumptions as disclosed in the most recent actuarial valuation
report approved by PRSAC. These assumptions and methods are in compliance with actuarial standards of practice. This data,
methods and assumptions are being used to provide consistency with the actuary for the retirement system who may also be
providing testimony to the Senate and House retirement committees.
Actuarial Caveat
There is nothing in HB 44 that will compromise the signing actuary’s ability to present an unbiased statement of actuarial opinion.
Actuarial Credentials:
Paul T. Richmond is the Manager of Actuarial Services for the Louisiana Legislative Auditor. He is an Enrolled Actuary, a
member of the American Academy of Actuaries, a member of the Society of Actuaries and has met the Qualification Standards of
the American Academy of Actuaries necessary to render the actuarial opinion contained herein.
Dual Referral:
Senate House
13.5.1: Annual Fiscal Cost ≥ $100,000 6.8(F)(1): Annual State Fiscal Cost ≥ $100,000
13.5.2: Annual Tax or Fee Change ≥ $500,000 6.8(F)(2): Annual State Revenue Reduction ≥ $500,000
6.8(G): Annual Tax or Fee Change ≥ $500,000