ATLANTA - The Georgia Senate passed a bill Tuesday that would allow the state teacher retirement fund to invest in “alternative investments” that critics view as potentially too risky.
The Teachers Retirement System is among the most major retirement plans that the state manages, along with the Employees’ Retirement System covering all other government workers besides teachers.
With thousands of beneficiaries, the teacher pension fund had a net position of nearly $79 billion through the 2019 fiscal year with roughly 20% in unfunded liability.
Senate Bill 294 would let the teacher pension fund diversify by up to 5% in alternative investments, which is same percentage available to other government-backed retirement in Georgia. Those investments could include venture capital funds, private equity and distressed debt.
The bill’s sponsor, Sen. Ellis Black, said contracted investors who manage the teacher pension fund have achieved returns above the national average in recent years but say they could grow the fund more by having access to other investments.
He dismissed concerns those investments might imperil the pension fund, noting the track record of the fund’s investors.
“You’ve got a whole spectrum of risk involved,” said Black, R-Valdosta. “A wise investor is going to have a balanced portfolio.”
Ellis said two-thirds of the teacher pension fund is currently invested in stocks.
Senate Finance Chairman Chuck Hufstetler, R-Rome, also urged lawmakers to trust in the investing acumen of the retirement fund’s caretakers.
“They have done better than the national average with what they’ve done,” Hufstetler said. “They also tell us they can do a better job with more flexibility.”
But concerns arose from several Democratic senators worried about the risk teachers could face with more volatile investments in their retirement portfolio.
Minority Leader Steve Henson, D-Stone Mountain, said lawmakers would be unwise to tamper with the pension fund with signs of a possible economic recession on the horizon. He argued teachers would rather lawmakers take a conservative approach to managing their retirement money.
“I think the conservative path is to stay the course we have,” Henson said. “I don’t think now is the time to jump into a riskier market.”
The bill now heads to the Georgia House for consideration.