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Mr. MOYER. Thank you, Mr. Chairman.

I would just say, generally, that the first 11 provisions of the bill are provisions which are comparable to provisions of law which are already in civil service legislation, and we support this comparability and recommend that they be enacted.

The final provisions relates to District contributions to the fund.

In addition to these conforming amendments, the bill also adjusts the District's contributions to the teacher retirement fund in order that teacher equity can be maintained with a minimum impact on the fiscal resources of the District. This provision would relieve the District of the requirement that it pay interest on the unfunded accrued liability of the fund, thus freeing District revenues for more immediate expenditure needs. This amendment requires that the present balance in the fund and future teacher equity both be protected.

The Commissioner believes that all of these amendments of H.R. 15980 are desirable additions to the teacher retirement legislation and recommends their favorable consideration by your committee.

Mr. Chairman, that's all I have, unless you have questions.

Senator EAGLETON. Yes; the counsel for the committee, Mr. Maeder, will ask some questions.

Mr. MAEDER. What is the current law regarding the District of Columbia's contribution? How is that termed?

Mr. MOYER. Mr. Maeder, I would like to refer that question to the Actuary of the Treasury Department, who has responsibilities for dealing with the fund.

Mr. KROLL. The present method requires that the appropriation estimate be based on the normal cost required to-according to the system and also interest on the unfunded liability. Now, the normal cost, I might explain, is simply the percentage of payroll which has been estimated actuarially to provide the benefits for a new employee starting to work in the District of Columbia teachers' system. At the last evaluation, it was about 19.57 percent of payroll, which means that this percentage of payroll is provided from the day a new employee starts to work from whatever source would provide benefits.

So the present law requires that the appropriation estimate include this normal cost and interest on the unfunded liability. The normal cost, part of it, is provided by the employee's contribution, and part of it is provided by interest on investments, and the remainder is supposed to be appropriated.

Mr. MAEDER. Do you have the figures on what amount of money that the District of Columbia would have to contribute under this formula for the past several years and for the next fiscal year?

Mr. KROLL. The last appropriation estimate which we prepared was as of June 30, 1969. I believe it was for fiscal year 1971, and the appropriation estimate was about $19 million.

Under this new provision, where you maintain the level of the fund, and the level of the fund, incidentally, was about $62 million, June 30, 1969. Under this new basis, it would take appropriation of about $4 million to maintain this.

Mr. MAEDER. Would you go back and explain, briefly, what the new formula is and how it would work?

Mr. KROLL. The new formula merely provides that the fund shall be maintained at its June 30, 1969, level of $62 million. Each year the

annuities and the contributions are taken in, and the interest on the investments of the fund are taken in, and whatever difference is necessary to keep the fund at $62 million is what is supposed to be appropriated.

Mr. MAEDER. Is the current status of the fund sound? Is $62 million what you need? What you ought to have?

Mr. KROLL. This gets into the theory of funding a retirement system, and there are all kinds of ways to finance a system. One of the strongest methods is the one that is in the present law, where you pay the normal cost and the interest on the unfunded liability.

The theory is here, if you appropriate the interest on the unfunded liability, that is the same as if the fund were fully there because you appropriate the interest on the part that isn't there. So this is really, in effect, the same as a fully funded system, because we appropriate the interest on the part of the District.

That is about the strongest method of financing a system that you could find.

The other extreme is the pay-as-you-go system. In the District of Columbia firemen's and policemen's system we are on a pay-as-you-go basis; there is no fund, and each year the annuities are paid as they come due, and there is no financing ahead for this. Each year is paid as it is come to.

So most systems fall somewhere in between these two extremes. The civil service system proposes to provide interest on the unfunded liability, which would make it a strong basis, and the District of Columbia policemen and firemen's system is at the other extreme, of course.

Now, this proposal is similar to the District of Columbia firemen and policemen, except that it keeps the fund at $62 million. That is the main difference. It is really what you call a modified pay-as-you-go system. We are keeping this fund at $62 million, as we have to, from year to year, rather than letting it disappear and then pay the annuities as they fall due, in the District of Columbia firemen's and policemen's system.

Mr. MAEDER. What would the contribution of the District of Columbia to the fund be for the next fiscal year? Could you give us some figures of what it would be over the next 2 or 3 years?

Mr. KROLL. There is a projection, I believe, contained in the House report, and this projection shows what the Government appropriation would be. However, whether it would be precisely the amount shown for fiscal 1971, I am not sure at this point. But for fiscal 1971, it would be approximately $3.9 million; for 1972, it would be $4.8 million; for 1973, it would be $5.8 million; for 1974, it would be $6.9 million; but next year, it would be $7.8 million, and so on.

Now, if you follow down the column of Government appropriations, on that basis, you would find that it would reach $19 million in about 1986, according to this projection. In other words, it would be 1986 before you got up to the $19 million level that the normal cost-plusinterest method would require.

Mr. MAEDER. Which is what would be required currently, under the old formula?

Mr. KROLL. Yes, currently; $19 million and the normal cost.

Mr. MAEDER. Mr. Moyer, what would the cost of this legislation be? Do you have figures on that?

Mr. MOYER. We have several cost figures, based on several factors, which were in the House report. The cost, of course, depends on whether the cost of living goes up, which affects the payments we can make into the retirement system, and other factors.

For example, in our first table, 10-year projected costs of H.R. 15980, assuming future salary increases of 7 percent per annum and future cost-of-living increases of 4 percent per annum, which have been the recent trend, the costs for 1971 would be a minus cost; that is, the increased employee contribution would be greater than the District's costs, and therefore, would be a minus cost of $186,000. And there would be a minus cost in 1972 of $35,000. Then, in fiscal year 1973, would be the first positive cost, and that would be $131,000, and so on up to our predicted cost, in 1980, would be $1,798,000-that is, costs of all the provisions of this bill.

Mr. MAEDER. Would you submit that for the record?

Mr. MOYER. We will submit this table and another table which assumes no increase in cost of living and no increase in salaries. (The tables referred to follow :)

TABLE 1.-10-YEAR PROJECTED COST OF H.R. 15980 ASSUMING FUTURE SALARY INCREASES OF 7 PERCENT PER ANNUM AND FUTURE COST-OF-LIVING INCREASES OF 4 PERCENT PER ANNUM

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TABLE II.-10-YEAR PROJECTED COST OF H.R. 15980 ASSUMING NO FUTURE SALARY INCREASES AND NO FUTURE

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Mr. MAEDER. Do you have any idea of what the increase in benefits for the average teacher or survivor would be under this legislation?

55-816 O 71-7

Mr. KROLL. This, of course, depends upon your inflationary trend. The more inflation you have, the more the high three would have an effect. And with a 7-percent productivity factor every year, it would be equivalent to about a 6-percent increase in annuity. Now, without inflation or without increased productivity, the cost would be very slight, the difference between a 5-year average and a 3-year average. This all depends on how the price index goes up.

Senator EAGLETON. Thank you very much, gentlemen. We appreciate your presentation and your appearance before the committee. Mr. Earl Jones, executive director, District of Columbia Association of Classroom Teachers.

Mr. Jones, we welcome you here this morning. You can either read your prepared statement, if you desire, or you may submit it for the record and summarize it for us, whatever is most convenient for you. STATEMENT OF EARL H. JONES, EXECUTIVE DIRECTOR, DISTRICT OF COLUMBIA ASSOCIATION OF CLASSROOM TEACHERS

Mr. JONES. Thank you, Mr. Chairman. I have a very short statement I would like to read, if I may.

I appreciate the opportunity to testify this afternoon in support of H.R. 15980, a bill to amend the District of Columbia Teachers' Retirement Act.

The District of Columbia Association of Classroom Teachers support all provisions included in H.R. 15980. We especially support the provisions for calculating annuity benefits on the average of the best 3 years of salary instead of the present 5 years, and for adding 1 percent to the automatic cost-of-living increase in annuities.

In addition to the provisions proposed in H. R. 15980, the Teachers' Retirement Act should be amended to allow temporary teachers who become permanent before age 62, and who continued teaching after reaching age 62, to withdraw moneys paid to civil service and to place the moneys from civil service into the District of Columbia teachers' retirement program. Now those teachers choosing to do so should also be allowed to pay whatever differences there may be in order to take full advantage of the District of Columbia teachers' retirement program.

Many temporary teachers who become permanent prior to their 62d birthday did not withdraw their money from civil service because it took, at that time, 5 years to gain tenure, and many of them chose not to do so at that time.

At the present time, moneys paid under civil service cannot be withdrawn at age 62 if a person continues to teach. Our information indicates that there are between 100 and 200 teachers who would benefit from the proposed amendment. It would not in any way cost civil service or the District of Columbia teachers' retirement anvthing. Those teachers would then receive just one check, from the District of Columbia teachers' retirement, rather than two checks, one from civil service and one for the teachers' retirement.

I therefore strongly urge that H.R. 15980, with the suggested amendment, be favorably approved.

Thank you.

Senator EAGLETON. Thank you, Mr. Jones.

Dr. Ellis Haworth, legislative chairman, District of Columbia Retired Teachers' Association.

Miss GREEN. Dr. Haworth has mailed a statement to you.
Senator EAGLETON. We'll make that a part of the record.
(The prepared statement of Dr. Ellis Haworth is as follows:)

PREPARED STATEMENT OF DR. ELLIS HAWORTH, LEGISLATIVE CHAIRMAN,
DISTRICT OF COLUMBIA RETIRED TEACHERS ASSOCIATION

Gentlemen: The D.C. Retired Teachers Association strongly urges you to submit a favorable report on H. R. 15980, a Bill amending the District of Columbia Teachers' Retirement Act of 1946.

The various provisions of this Bill are, we believe, non-controversial. They place the teachers in a position comparable to Civil Service employees as to retirement benefits; they remove several provisions of existing law which result in inequities between permanent and temporary teachers and between teachers who retired before and after October 24, 1962.

The provisions of Section 4 of this Bill appear to provide adequately for the continued soundness of the retirement and annuity fund through contributions to it each year by the District of Columbia Government in sufficient amounts to keep the balance at the current level.

Senator EAGLETON. Will you identify yourself, please, and give us your statement?

STATEMENT OF MISS ELSIE E. GREEN, STATE DIRECTOR, DISTRICT OF COLUMBIA RETIRED TEACHERS ASSOCIATION AND VICE PRESIDENT, NATIONAL RETIRED TEACHERS ASSOCIATION

Miss GREEN. I am Elsie E. Green, who is State DirectorSenator EAGLETON. Elsie Green, State Director, National Retired Teachers Association?

Miss GREEN. Yes. I speak in support of H. R. 15980, a bill amending the Teachers' Retirement Act of 1946. I believe the provisions will be very helpful to our teachers in these troubled times.

Section 4 of this bill, resting on the stability and adequacy of the revenues of the District of Columbia, appears to confirm the continued soundness of our District of Columbia teachers' retirement and annuity fund through the yearly contribution of the District of Columbia government in sufficient amounts to maintain its adequacy under present foreseeable circumstances.

I

Representing the two organizations, of which I am an officer, therefore strongly endorse the passage of this bill, gentlemen. Senator EAGLETON. Thank you, Miss Green, we appreciate it. Mr. Don Goodloe, legislative representative, Washington, D.C., Teachers' Union.

Mr. Goodloe, I understand you have a prepared statement. You can submit it for the record and summarize it for us, or read it, as you desire.

STATEMENT OF DON B. GOODLOE, LEGISLATIVE REPRESENTATIVE, WASHINGTON TEACHERS' UNION

Mr. GOODLOE. I should be glad to summarize it, and I have already submitted same for the record. The committee has some of my statements available.

(The prepared statement of Mr. Goodloe follows:)

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