Of course, this isn't the first time TRS investments have come in below expectations. Even before this year, the 5-year average rate of return was only 4.1 percent, and the 10-year average was just 6 percent. Even its long-term averages are below its projections.
And when investment returns come in under projections, it falls on taxpayers to make up the shortfall.
Ultimately, there are only two numbers that matter: the amount of money the pension fund will pay out for earned benefits, and the amount of money it has on hand. Between now and 2045, TRS will pay $376.5 billion to retired teachers. It has just $36.3 billion on hand. In order for these assets to cover future payouts, TRS would need to see average investment returns of more than 18.5 percent per year.
The simple fact is that TRS is broke. Under new accounting rules, TRS has less than 23 percent of the money it should have in the bank today in order to make its pension payments. The system doesn't even have enough money on hand to pay out benefits to the people who have already retired. Pension experts and TRS's own actuaries agree: the fund could soon be insolvent.
Without real reform, pensions will continue to crowd out funding for core government services, like education. And the longer lawmakers delay action, the worse our pension debt crisis will become. Legislators canít ignore the math any longer. Only major reforms, like those heavily-centered on a defined-contribution plans and those tackling the automatic cost-of-living adjustment, can get the problem under control.