The childhood parable of the grasshopper and the ant appears to have faded from the memories of Louisiana’s school board members, teacher unions, principals and superintendents.
That phalanx of the education establishment won a fight over whether Louisiana’s government will be like the ant, prudent and cautious with its money, or the grasshopper, spending for today — and broke, down the road.
The difference between the two approaches to the future seems small. The state’s teacher retirement system wanted a state board to approve its projection of 7.75 percent earnings. Legislative Auditor Darryl Purpera suggested changing the rate to 7.4 percent.
The ant was smashed by the school systems, because that small change in rates would mean that school boards would spend about $95 million in the coming fiscal year to pay the debts of the retirement system for its employees.
Even a small percentage change makes that much of a difference, because the pool of assets for the system is so large. And if you anticipate less in market earnings, as the auditor’s office recommended, teachers’ employers — school boards — have to pay into the system to make up the difference.
As anyone knows who has opened their retirement account statements lately, the ant ought to win any such argument, hands down. But today’s spending is more important to the grasshopper caucus. That $95 million won’t go toward chipping away the $11 billion debt owed by the retirement system.
No one is unsympathetic to the notion that many school systems would have to make painful cuts if faced with a $95 million additional bill to their retirement system. Nor is the $11 billion owed tomorrow but is instead a long-term obligation to pay the anticipated retirement checks for current and future retirees, who rely on the state checks because state workers are not eligible for Social Security.
The long-term debt is a product of irresponsibility by generations of legislators and governors who failed to pay into the system enough to fund future costs. It was the ant and the grasshopper story, over and over again.
But must we repeat the mistakes of the past at the behest of the grasshopper caucus of 2016?
We commend the legislative auditor’s office for this stand in favor of financial prudence.
The teacher system has shown strong returns in recent years on its investments, particularly compared to the reckless investment policies of smaller retirement systems, of which Louisiana has too many — and most captive to their grasshopper caucuses.
Are the good returns of the recent bull market going to last forever? Not this year, we suspect.
A little-known state body called the Public Retirement Systems Actuarial Committee voted this week with the grasshopper caucus, but Purpera’s statement did lead the group to promise to review the investment return rate in June, before the new fiscal year begins July 1.
Given the state of financial markets these days, we urge the grasshopper caucus to learn to save now, because Purpera’s recommendations might look tame by then.