Your Retirement - Georgia's TRS and AIG VALIC

I wanted to try and explain something that I have noticed for the past few weeks. I have seen an increasing number of e-mails and searches regarding the Georgia Teacher Retirement System (TRS) and AIG VALIC.

For some reason, most people seem to be thinking that the Georgia TRS and AIG VALIC have some relationship. They are not one in the same, and one has nothing to do with the other. I tried to explain this to someone yesterday on the phone, and the example that they understood was the following:

Think of your retirement as a house. You have water, natural gas, and electricity to run your house. If there is a problem with one of those companies, it does not effect the others. If there is a water problem, the water company takes care of it, etc., etc. So think of Social Security as water, AIG VALIC as natural gas, and TRS as electricity. They are completely independent of each other. This is not to say that they may not all have their own issues, but the relationship between them is only at your level.

TRS may have made investments in AIG, but this is not the same as a AIG VALIC account. That investment would affect the overall value of the TRS fund, but your benefit is based completely on a published list of variables. According to previous annual reports, the TRS fund is very diversified betweens various stocks and bonds. Additionally, its holdings in any one stock are only small percentage wise investments.

• Remember your benefit from TRS is guaranteed by Georgia state law, and you can call TRS to discuss with them your projected benefits or download your most recent TRS statement via their website.
• Your AIG VALIC account has only the money within the account (and any future contributions and gains/losses). Any funds that you eventually withdraw from the account will come from there.

I hope this helps, but if there are additional questions, please e-mail me.

Furloughs for Georgia's Educators? - Part II

First, I have to laugh and apologize. I am one of those crazy analytical people, and to think that I misspelled "Georgia" in yesterday's title made me laugh this morning when I noticed it. I guess so much for trying to be perfect. Anyway...

I received a few communications on Thursday saying that they would respond, but I had one very good response, and it came from Representative Edward Lindsey. I will post his response below, but I must say that I was impressed by the clearly well thought out response to my letter.

There are many issues and ramifications to any decision that is made whether it be to act or not act, but the decision should be clear, concise, and as painless as possible. I know that Representative Lindsey's comments were "designed to begin the discussion on how to deal with the financial shortfalls facing local school systems," but such a broad reaching action could cause undue harm on those that quite literally do the most for our state day in and day out.

The e-mailed response is below:
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Sent: Thursday, March 26, 2009

Robby,

Thank you for your thoughts and concern regarding teacher furloughs. Let me first emphasize that at the present time furloughs are not in the proposed State budget. In addition, the proposed budget continues full funding for school nurses, graduation coaches, RESA, ETTC and National Board Certification. These were all priorities this year of education advocates in Georgia.

My comments the other day were designed to begin the discussion on how to deal with the financial shortfalls facing local school systems caused by declining revenue in their local areas. I believe strongly that teachers and local school systems need to continue the discussion amongst themselves and consider the possibility of up to six day furloughs. The problem is that in our present economy many school systems are reeling from revenue shortfalls and the only legal alternative that they have for cutting costs is to lay off teachers. Furloughs provide a second alternative to save teachers’ jobs and to keep these professionals in the classroom.

In furloughing six days we will in effect be rolling back for one year the 2009 teacher pay raise. Please recall that teachers in this State were the only State employees that received pay raises in 2009. That said, I do not underestimate the financial hardship this would bring to families of teachers. However please keep in mind it is my intention to plow these savings directly back into the classroom. This could preserve between four to five thousand teacher jobs in Georgia.

Thank you again for your email, with

Kindest Regards,

Edward Lindsey

Georgia House of Representatives
District 54

Furloughs for Georgia's Educators?

Last week, Georgia State House Representative Edward Lindsey made a proposal to the House Appropriations Subcommittee on Education where he serves as chairman. In his proposal, Georgia's 125,000 educators would be furloughed during six planning days. This essentially means that every educator would lose six days of pay.

Six days of pay may not sound like that big of a deal to you. Of course, that is until you do the math. Look at your contract. It is for 190 days. Take your annual salary and divide it by 190. Now take that and multiply it by 6. That is the gross deduction in pay that you would be losing. For someone making $50,000, they have now lost $1,579 in pay. Of course, this would save Georgia $200 million.

Georgia's educators were just awarded a 2.5% cost of living increase for the 2009-2010 school year. By doing a bit of math, these same educators that thought they were getting raises would now lose 3.15% of their salary. Even with the raise factored in, Georgia's 125,000 educators would lose 0.74% of last year's salary.

On Wednesday, I wrote the letter at the bottom of this post to Representative Lindsey asking him to look at other alternatives. There must be some out there even beyond the one that I gave to him in my letter. I suggest reading the letter, doing some research, and discussing it with your colleagues. If this is a road that the legislature may go down, it is always better to have some alternatives for them to consider.

On Friday, I will post any and all of the responses I receive.

Incorrect Information - Congress and the Witch Hunt

For me, there is nothing worse than incorrect information. We all make mistakes and misstatements, but just complete an utter incorrect information is just wrong. When I do it, I try to apologize and at least be humble.

Earlier today (Tuesday), I watched some of the U.S. House of Representative's Financial Services committee meeting with Federal Reserve Chairman Ben Bernanke, U.S. Secretary of Treasury Tim Geithner, and Federal Reserve Bank of New York President William Dudley testifying. I can honestly say that I have never been so embarrassed to see our politicians in action than I was today. Without calling out individual Representatives, let me just say that the "Grill on the Hill" as CNBC was calling it this morning prior to the hearing was exactly right.

Many of our representatives, from both parties, are either uneducated (I do not believe that) or just playing up to the media when these witch hunts take place. Let me give a few examples:

• I heard one Representative essentially let Secretary Geithner know (by just about screaming) that it was evident that Goldman Sachs was behind the various bailouts to make money (completely untrue). In fact, they asked if his Chief of Staff worked at Goldman before. When Geithner said that it was one of several places, the accuser just kept on about how it was all a conspiracy (just do not ask the accuser about some of the various things that have surfaced lately about their personal life).
• Another asked where in the Constitution did the Treasury or the Federal Reserve have the power to make their various moves. When Geithner tried to answer about the various powers that Congress had legislated, the questioner stopped him and said... the Constitution.
• Finally, one made me so angered that I felt the need to write a letter explaining my embarrassment. The Representative essentially accused Bernanke and Geithner of using the AIG bailout funds to help any person with an AIG retirement account, so unlike the rest of us that loss "40% to 50%," they did not lose anything. How do you answer a question that is so far off base that it is just plain wrong?
  I nicely (unlike the tone the Representative took with Bernanke and Geithner) tried to explain in my letter that the AIG VALIC accounts (many of my readers have e-mailed me their statements) lost just as much as everyone else. They are invested in the same type of mutual funds that everyone else is, and they shared the same pain as everyone else did as the stock market plunged in the fall. How were those accounts saved again?

I am not going to call any one person out, but instead I would like to let it be known that if you do not have all of the information, please get it prior to asking questions. I was embarrassed by the lack of respect shown to these men testifying and the lack of preparation prior to asking questions.

I finished my letter with: "These are troubling times for the nation, economy, and stock market, and it will take a continued collaborative effort to move forward. I do not agree with all of the moves of our leaders from either party, but true bipartisan efforts will help to make a difference. I hope that you agree and that calmer heads will prevail."

I am sure my comments will fall upon deaf ears, but at least I have tried to speak. Let me go bang my head against the wall on another subject.