SUMMARY AND ACTIVITY AND PROGRAM As required by law, the Board of Education contributes annually to the Teachers' Retirement and Annuity Fund in accordance with actual calculations made at the U.S. Treasury Department. This activity presents the cost of services of the fund and provides for the District's contribution. Specifically, these are as follows: (a) the normal costs stated as the employers' share of financing the fund and (b) the interest on the unfunded liability of the fund. As a matter of interest, an abbreviated comparative balance sheet for the Teachers' Retirement System is shown below as of June 30, 1961, and June 30, 1967: These figures show that during the last 6 years, the liability of the fund has increased by about $107 million while the fund, through contributions, has increased by only $21 million. The result is an $87 million increase in the unfunded liability. These appropriation estimates are made by the Treasury Department actuary on a "normal cost plus interest" basis. From that source, the statement of estimated fiscal year 1969 appropriation needs are obtained as shown below. Fiscal year 1969 Normal cost of 10.34 percent of estimated annual $46,079,048 payroll $4, 765, 000 Amount required to cover interest accruing during the fiscal year on the $187,900,000 unfunded liability- Total 5, 500,000 10, 265, 000 Mr. NATCHER. Why the decrease below last year? The figure was $6,628,200 last year. Why the decrease? Dr. CARROLL. The decrease was due to legislation changing the funding arrangements under the Teacher Retirement Fund. It appears that the legislation requires an amount less than is presently in the base budget. The bill's provisions are more like those required under the police and fire and other types of retirement systems. This bill, I have not checked the progress recently Mr. HERMAN. It is still pending before the Senate. It is S. 2901. It established a level rate of $62 million estimated balance at the end of fiscal year 1968. Mr. NATCHER. Still over before the Senate? Mr. HERMAN. Yes, sir. Dr. CARROLL. We are confident we will get some action on this. Mr. PATTEN. Don't get me talking about pension funds because we will be here all night. You do say that your unfunded liability is four times that of the funded liability due to the increase in the obligation of the fund by salary increases. Dr. CARROLL. Yes, sir. Mr. PATTEN. If you are talking about taking a new formula which will require you to put in less money, you will weaken the actuarial Soundness of the fund. Dr. CARROLL. The formula and one of the statements in the bill as presented does require that obligations against the fund, if they should ever be in excess of that, are to be obligations against the current revenues of the District of Columbia. This is the way the police and firemen retirement funds are paid at the present time. Mr. PATTEN. Say we stop having a pension fund because it is not actuarially sound and say so long as we have $62 million we are okay. That does not give the right impression. What is going to happen the next 20 years? You might have a crisis. The fund should be kept sound. It would seem to me that pensions are such an important part of your employment benefits that the money should be put up and the pension fund should be funded on a sound actuarial basis. This is not the place to make a false saving. Dr. CARROLL. The funding at the present time, as you indicated, is an unfunded liability. This unfunded liability will increase when you raise salaries of teachers. For example, the fact is that where contributions were made on one assumption, as the salaries increase people are going to retire at rates of pay which were not anticipated at the earlier contribution rate. Also we have provisions for retirees to receive increases based upon the cost of living. This also increases obligations against the fund, which are not funded. I feel, and I think that many others will feel the same way, that we have to recognize that retirement is an obligation against the current situation. Mr. PATTEN. Did anyone project these pension funds not only at the Federal level, but State and municipal level across the country? He knows this is going to become year after year one of the greatest problems in taxation. The first pension fund I administered was the police and firemens fund when I became mayor in 1934. Do you know how much was in that fund? Exactly zero. There was not a dime, and the entire liability came out of general taxation and couldn't have hit us at a poorer time. Up until I took over in 1934, they had dipped into the setasides, the reserves, and in the worst year that it could possibly have happened to us we were not paying our employees. Here we had the widows getting $80 or $90 a youth. A policeman's widow relied on general taxation money when some of their husbands paid into t pension fund for 40 years. I think there is something dishonest abe it. If you bring a teacher from out of the community and she is unde the impression you have a pension fund and take her contribution year in and year out, I don't think she would approve of your using het money to put a ceiling on the reserves. If she is going to stay here + years, I think she would like to feel the money would be there whe it comes time for her to collect. As I say, we don't want to stay here until midnight, so I will say nothing further. Mr. HERMAN. Mr. Patten, the law does provide we maintain the equity of all the employees of the public school system. They cannot go below the amount that retains the equity. In other words, all the money paid by the teachers stays in the fund." Mr. PATTEN. When is the millennium going to be reached? Mr. HERMAN. It will go up every year, depending on the amount of money paid in by the participants. Mr. PATTEN. What you are really saying is that you are not going to be putting up your share as provided by law. If this bill is passed. you are going to put in less money. ELEMENTARY SCHOOL LUNCH PROGRAM Mr. NATCHER. Under elementary school lunch program you are requesting $1,759,701 and 18 positions. Here we have an increase of $520,721. We shall insert page 17-8-1 of the justifications. (The page follows:) JUSTIFICATION BY ACTIVITY AND PROGRAM 1969 base Increase 1969 estimate Positions Program total Positions Program total Positions Program total Positions Program total Positions Program total 1967 obligations (actual) Transfers Mr. NATCHER. What about this increase? Dr. CARROLL. This increase is to allow us to provide free lunches daily to 16,000 children rather than 13,500 children daily as provided in the 1968 school budget. This includes food costs of $185,000. May we point out we are trying to have hot lunches and transport the for to schools if they don't have the facilities for cooking in the schools Thus we need containers. Insulated containers cost $270,000. That is for 500 units. BANKING RECEIPTS, 180 SCHOOLS We are asking for a safe to be put in every school so that when they have to retain some money, this will be in a better, more secure location. This is a request for $18,000, one for every school. The other items are required pay increases of $1,710; postage $04: annualization of prior years, approved workload, $8,417. Mr. NATCHER. Dr. Carroll, I believe that several years ago this committee called for an expansion of this particular program. That is right? Dr. CARROLL. This committee has solidly supported this program. I would say it has urged us to increase our rate of expansion of this program beyond our current plans on one or two occasions. Mr. NATCHER. At this particular point in the record we would like for you to provide a short statement showing the expansion and just where we are on this particular program. Dr. CARROLL. Yes, sir. (The information follows:) PUBLIC SCHOOLS OF THE DISTRICT OF COLUMBIA FOOD SERVICE PROGRAM The school food service program is currently operating from 59 schools with cafeteria facilities. These schools have an enrollment of approximately 70,000. of which 19,000 are in elementary schools. The program in all secondary schools is for both pay service and needy. The expansion of pay service to elementary schools is showing progress and the capital outlay schedule for fiscal year 1969 indicates that 23 additional elementary cafeterias will be opened. At that time, the students in elementary schools with cafeterias will increase from the present 19,000 to approximately 42,000. By comparison, the number in fiscal year 1967 was 12,000. The food service program is continuing to make progress in its conversion from bag lunches to hot lunches for needy elementary students. As of May 13. 1968, there were 15,968 needy lunches served to elementary students, of which 6,046 were hot lunches. These hot lunches were served in 20 elementary schonis which also provided transported hot lunches to an additional 13 schools in which needy students were enrolled. |