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A.  The Constitution of Louisiana requires the legislature to provide for the retirement of teachers and other employees of the public educational system of the state.  The legislature finds that providing generous retirement benefits for our public educational employees is an important element of the complete compensation package the state provides for service in Louisiana’s public educational system.  In order to maintain the purchasing power of the benefit of a retiree of the Teachers’ Retirement System of Louisiana, periodic increases in the benefit amount are necessary to offset increases in the cost of ordinary living expenses.  When the timing of such increases is infrequent or erratic, it becomes difficult for such increases to protect the retiree from falling behind financially.

B.  The legislature recognizes that while providing periodic cost-of-living increases is necessary to preserve the standard of living of our retired public educational system employees, such increases have a price which is ultimately paid by the taxpayers through allocation of employer contributions to the system.  Increases should therefore be limited to a reasonable level, to prevent the expense of such increases from causing an undue burden on the state and local fisc and therefore on the taxpayers.  Additionally, such increases are not meant to function as pay raises, but merely to maintain the standard of living of the recipients, keeping pace with the Consumer Price Index for All Urban Consumers, U.S. city average for all items (CPI-U).

C.(1)  The legislature has provided for an employee experience account, a mechanism for determining each year whether a cost-of-living increase may be granted and the amount of any such increase that is permitted.  The provisions of La. Rev. Stat. 11:883.1 prohibit any cost-of-living increase paid from experience account funds from being in excess of three percent, helping to limit the expense of granting each such increase to a reasonable level.  Additionally, if the growth of the CPI-U is less than three percent, then the increase from the experience account is also of this lesser percent.

(2)  For an increase payable on July 1, 2007, the application of the experience account mechanism results in a determination that, if the system properly complies with all other requirements of the experience account statute and subject to the approval of the legislature, the board of trustees of the Teachers’ Retirement System of Louisiana may grant an increase to eligible retirees, survivors, and beneficiaries equal to the CPI-U for the 2006 calendar year of two and one-half percent.

D.(1)  Considering the factual and policy statements in Subsections A, B, and C of this Section, and taking into account that retired employees of the public educational system have not received a cost-of-living increase for four consecutive years due to market conditions and the lack of sufficient funds in the experience account, the legislature finds that, for the July 1, 2007, cost-of-living increase payable pursuant to the experience account statute, permitting the board to grant the maximum three-percent increase allowable pursuant to the provisions of the experience account statute without regard to the CPI-U helps preserve the purchasing power of retired employees of the public educational system, their survivors, and beneficiaries without creating an undue financial burden on the state or the taxpayers.

(2)  Notwithstanding the provisions of La. Rev. Stat. 11:883.1(B)(2) and (C)(1) and (2) limiting any increase granted from experience account funds and payable July 1, 2007, to two and one-half percent, the board of trustees of the Teachers’ Retirement System of Louisiana is authorized to grant from the funds in the experience account a supplemental cost-of-living increase of one-half of one percent, which may be paid beginning July 1, 2007, providing all other requirements of La. Rev. Stat. 11:883.1 are met and the total level of the increase granted does not exceed three percent.

E.  Except for the authority to grant a supplemental one-half of one percent increase payable July 1, 2007, nothing in this Section shall be construed to grant the board of trustees of the Teachers’ Retirement System of Louisiana any additional authority to grant or to recommend to the legislature that it be permitted to grant a cost-of-living increase greater than the increase as calculated pursuant to the provisions of La. Rev. Stat. 11:883.1 as they exist on June 30, 2007.

Acts 2007, No. 67, §1, eff. June 30, 2007.