Promises are good things and must be kept
We are taught from a very early age that a promise is a promise.
Alabama made a promise to teachers, nurses, prison guards, sheriff deputies, child-protection workers and others serving in the public interest that they could have a decent retirement. Seventy years ago the Retirement Systems of Alabama (RSA) was created to ensure that promise was kept. Not only has the RSA fulfilled its obligation, but it has been a tremendous force for progress in the state.
The mission statement of RSA reads: “to serve the interests of our members by preserving the excellent benefits and soundness of the Systems at the least expense to the state of Alabama and all Alabama taxpayers.”
Sounds like a good mission. So, how are they doing?
From most accounts RSA is doing very well. There are approximately 90,000 Alabama seniors receiving benefits each month. The benefits are not lavish by any stretch — the average monthly retirement check is around $1,700 — but they are always paid on time and guaranteed for life.
Contrary to what some may think, the taxpayers do not simply write a check for all retirees each month like they do with Social Security. RSA pays for these retirement benefits by the investments it has made over the decades with money contributed by the employees and employers. It is important to note the teacher and the school system and the deputy and the sheriff’s department both pay into the system.
Recently RSA has been in the news because its return on investments has been lower than other states. This is also not the first time RSA has been through a rough period.
Back in the early 1970s RSA had only a fraction of what was needed to pay current and future benefits. Through prudent investment strategies and due diligence the RSA was able to build up a fund that had 100 percent of the money needed to pay benefits by 2006. After the stock market collapse and the economic downturn, the total went to 71 percent. But RSA is strengthening once again as the economy rebounds and investments recover, with more than $26 billion in assets today.
Yet, there have been grumblings in the statehouse about RSA, with ideas that would fundamentally undo the promise we made to teachers and other public employees.
A prime target of critics is the RSA policy of investing 10 percent of funds in Alabama. The Alabama investment strategy was critical to landing Mercedes, Hyundai, Honda and Toyota, the backbone of our auto industry. The state tourism industry went from $1.5 billion to almost $10 billion since RSA changed the face of Alabama with the Robert Trent Jones Golf Trail, Renaissance resorts and the Alabama Cruise Terminal.
Critics say RSA made investment returns about one percent less than the national average over the past three years, with the Alabama investment policy as a cause. Democrats believe the number of jobs created and economic impact are every bit as important as the overall returns, as long as RSA is fundamentally sound — which it is.
One proposal floated around the statehouse is to get rid of the current board of directors that oversees RSA — currently, the board primarily consists of members who are elected by the beneficiaries — and replace it with a new board made up entirely of political appointees. Using political cronies is never a good answer, and taking away the elected representation of people who put there hard-earned pay into the RSA is wrong. It is a broken promise.
Another proposal is to change the benefit for new and some existing employees from a guaranteed benefit to one that is not. The proponents of this proposal center their arguments on whether the benefits are affordable. The RSA experience shows that they clearly are.
Democrats understand the need to provide retirement security to those who serve our community. Democrats also believe the government should keep it’s promises. That is why Democrats are ready to protect the Retirement Systems of Alabama in this legislative session.