Jamiese Mims Fuller, a retired Birmingham teacher, reviews her students’ progress at her home after working a shift as a tutor at a nearby school. Fuller is one of many retired educators who said they work part-time to keep up with rising costs of living. (Rebecca Griesbach/al.com)
This story was reported in collaboration with al.com.
Alike Adia Johnson, 49, retired early in June 2023 due to health issues and stress on the job. By the time she left her Birmingham school, she was on five different blood pressure medications.
Because she spent 26 years in the field, she qualified for a Tier I retirement plan, which is awarded to retirees with more than 25 years of service and typically offers a higher payout.
Still, the majority of her retirement check is taken up by health insurance, which costs $600 a month, she said. And that’s not counting the copays and out-of-pocket costs that climb with each doctor’s visit.
“I would be in trouble if I had to count on only a teacher’s income,” she said.
Johnson was one of several retired educators who attended a meeting at Sixth Avenue Baptist Church in Birmingham on a recent October morning to hear ways to get the most out of their retirement checks.
One of the major topics: the state’s efforts to confront the rising cost of health care premiums. In October, the state PEEHIP board voted to withdraw nearly $120 million from a health care trust fund to cover the increases. It’s still uncertain whether lawmakers will fully fund the program in 2026.
“We had a real scare,” Brenda Lockhart, a representative from the Alabama Education Retirees Association, told the room that morning.
In interviews, multiple retired educators said health care costs had taken up a growing chunk of their retirement payments, while their monthly checks have stayed flat for more than a decade.
“A lot of people will make sure that they get a job in education so that they have good insurance,” Lockhart said. “As retirees, we paid our dues, but we still want good insurance.”
Alabama’s 107,273 retirees and beneficiaries have not seen a cost of living adjustment (COLA) since 2007.
David Foster, who retired in June 2013 after 35 years as a teacher and principal, is getting the same payment he did when he retired. He has seen some one-time bonus checks. After taxes and other deductions like insurance, he receives around $3200 a month. He has been the president of the Jefferson County branch of the AEA retiree association but his term expires, so he’s serving as assistant treasurer and is on a state committee for AERA.
“It’s kind of one of those situations where, you know, it’d be great to be able to do it, but at the same time, you jeopardize the functioning of the current system,” he said.
Carolyn McMorris, 78, who retired from teaching in Birmingham City Schools in 2009, gets the same amount of money in her retirement check as she did 15 years ago. But her utility bills, deductibles and copays kept climbing. To supplement her income, she started substituting again, but had to stop when the pandemic hit.
“I would like to go and make more money, but my health won’t permit it now,” she said.
Johnson has lived with her 75-year-old mother, who is also a former teacher, since her mother retired and manages a business on the side to make sure both of them are able to make ends meet. Johnson said her mother is able to help with some expenses, while she offers to cook meals, wash the cars and do other housework to avoid extra costs.
“You think that when you retire and your house is paid for, you’re going to have more money,” she said. “But when you retire, you spend way more on doctor visits, medical things, and you have to pay for people to help you do things you used to do on your own… If the things you need to pay for keep multiplying because you’re getting older, and you’re not getting any increased income, where does that money come from?”
Jill Jackson, executive director of the Alabama Education Retiree Association, said in a statement that many retirees have never experienced a COLA and that retirees “have no room for frivolous spending of their fixed incomes.”
“Instead, they are concerned with the increasing health insurance and medicine costs, gas, utilities, and food,” she wrote. “Many of them cannot afford necessary dental care or quality hearing aids.”
As the retirees filed out of Sixth Street Baptist Church that October day, Johnson pointed to their metal canes and walkers.
“All of this equipment,” she said, “that’s an expense.”
The budget question
The state is not unique in its lack of cost-of-living increases, but at least one budget chair does not see a solution in Alabama’s future.
Prior to the Great Recession, COLAs for retirees were relatively routine. There was a 4% COLA in FY 2001, 3% in FY 2003, 4% in FY 2006 and 7% in FY 2007.
But the Great Recession led to a major downturn in the Education Trust Fund (ETF) budget, which pays for public education services in the state.
The downturn, combined with national policy changes that significantly increased the upfront cost of COLAs, effectively brought cost-of-living increases for retirees to a halt. Lawmakers have approved one-time bonuses for retirees but have been reluctant to grant further ones, fearing a surge in unfunded liabilities.
“That was a pretty expensive practice, and after the 2008-09 recession, when the funded ratio went down, the Legislature really put a stop to that, because the RSA’s unfunded liability went down in part because of the COLAs,” said Neah Scott, legislative counsel with RSA.
Since 2007, legislators have also taken steps to reduce retirement benefits. In 2012, the state created a new retirement plan for state employees who began their careers after 2012, known as the Tier II plan, offering fewer benefits than before.
According to the RSA, the Tier I plan, which covers employees hired prior to 2013, has a 7.5% member contribution rate and retirement eligibility after 25 years or 10 years at age 60. Tier II has a 6.2% member contribution rate for the category of employees that include teacher, and retirement eligibility after 30 years with early retirement penalty at age 62.
Rep. Danny Garrett, R-Trussvile, the chair of the House Ways and Means Education Committee, which oversees the Education Trust Fund (ETF) budget, said that the sheer cost of COLAs makes them unlikely to happen. A policy change by the Government Accounting Standards Board in 2007 meant that the state had to fund the cost of the adjustment based on an estimate of how much it would cost over decades.
A one-time 4% COLA, Garrett said, would cost the ETF $800 million– around 8.6% of the state’s education budget.
“I will say that back in the from early 2000s to somewhere around 2008 or 2009, there were three or four COLAs the Legislature passed, and RSA tells us that of the amount that we’re underfunded in the pension plan right now that about $2 billion of that underfunding is related to those four COLAs,” he said.
Scott wrote over email that COLAs added around $2.2 billion in unfunded liabilities to TRS and ERS.
Scott said a 4% COLA for education retirees, based on FY 2023 valuation, would cost $944 million upfront with no unfunded liability. It would be $236 million for 1%, or the full lifetime of the adjustment.
According to Equable, a nonprofit that focuses on public pension research and education, pension debts across the country are taking up larger portions of state education budgets.
Anthony Randazzo, the executive director of the nonprofit, said that Alabama’s TRS plan, which is about 65.1% funded, is considered to be “fragile funded status,” or between 60% and 90% funded. The pension plan is not in danger but it is not recovering, so a bad year or two could put them in a bad place.
Scott said that she disagreed with the premise of the Equable report that pension costs are rising faster than education budgets. She said a better comparison would be total employer contributions to total education appropriations, beyond just the ETF. Those numbers, she said, fluctuate in comparison to each other.
“The bottom line is that there’s not a straight trajectory of increases, but it’s one that fluctuates and while this is kind of a helpful measure to track, it’s way more complicated than I think study suggests,” she said.
Jackson said that legislators need to consider the impact of the rising cost of living.
“Over the years I have repeatedly heard elected officials say retirees knew what they were getting when they signed their retirement paperwork,” wrote Jackson. “Yes, this is true but never would they have known that future living expenses would skyrocket to where they are now.”
Jamiese Mims Fuller, 72, retired in 2002 after teaching in Birmingham City Schools for 27 years. Up until that point, retired educators typically got raises when teachers did, but those cost-of-living increases stopped shortly after her retirement. Mims Fuller said she received two bonus checks since 2002, which she said never exceeded about $600.
“I didn’t think [a COLA] was going to be every year, but I did think it was going to be every time the active school teachers were getting one,” she said. “Because that’s the way it had always been.”
At the time, Fuller was a single parent to a teenage son. Without a regular raise, paying for things like his basketball uniforms and future college expenses got harder and harder.
To make ends meet, she taught at a local private school for about five years. Since then, she’s worked part-time as either a substitute teacher or a tutor to be able to keep up with home and car expenses.
“You can’t plan when you don’t know how much you’re going to get,” she said. “But you were thinking that you were going to get enough that – with the way inflation goes, with the way the economy goes – that you were going to be able to make enough to maintain a stable lifestyle.”
Different approaches
Randazzo said that systems use that money from investment returns to help to get to no pension debt. Not fully funded plans often use high-risk plans.
“When we look at these different approaches, the absolute best way to handle it is to have the Legislature just find the money in the budget to pay for it, so you don’t harm the fund, so you don’t slow down the funds recovery, so you do help retirees with their inflation projection, but the state has to have the political wherewithal to do that, as well as the budget capacity to do it,” he said.
Where COLAs are automatic, he said, states plugs those increases into their budget forecasts. It sometimes does not even hit the budget.
“The instances where pension for COLAs can harm a pension fund is when they are not anticipated, they haven’t been accounted for, and they get authorized anyway,” he said.
Garrett, though, said pre-planned COLAs seem unlikely.
“That doesn’t help you,” he said. “We are where we are. So, no, I mean, the world has kind of moved away from defined benefit plans, which is what this pension plan is.”
Another issue is the heavy earmarking of Alabama state revenues. More than 80% of state revenues have to be spent in specific ways, giving lawmakers relatively little ability to allocate money. Most income taxes and sales taxes go to the education budget. Under a 1947 constitutional amendment, income taxes must go to pay teacher salaries. According to PARCA, 24.9% of the ETF in 2023 came from sales taxes in FY 2023. Even if they changed the model, Garrett said, it still wouldn’t be caught up, and they would still have to fund it.
Foster said the Alabama Education Retiree Association has proposed that if a state lottery happens, it could contribute to the trust fund for retirees.
“And, well, we know what happened to all the lottery and gaming bills the last session,” he said.
Point of contention
Garrett said that they would be more likely to move towards another one-time bonus check model, which they have done in the past. In 2022, ERS and TRS retirees received a bonus of $2 for each month of service, according to the RSA.
“The reality is that we would continue to pay the minimum contribution to strengthen the retirement fund (and) retirement plan so that employees can continue to be able to count that defined benefit forever, and then I think we would pay, you know, one time bonuses, 13 month checks, whatever, when we can. But absent a revenue stream or a revenue source, there’s just not a really good answer,” he said.
Garrett said, even with a new revenue stream, it could not be a meaningful amount for annual COLAs.
Funding for retirees became a point of contention between the Alabama House and Senate at the end of the 2024 session. The Senate version of the 2025 budget included $5 million for a trust fund created in 2021 periodic bonus checks to retirees. Under the original legislation, bonuses can only be paid when the fund reaches a balance of $100 million. The House removed the funding.
Garrett said that the money would only come out to around 15 cents per month of service, or $45 for 25 years of service.
Scott said she could not speak to the K-12 numbers from Equable. The Department of Finance wrote that they could not confirm them.
Sen. Arthur Orr, R-Decatur, the chair of the Senate Finance and Taxation Education Committee, which oversees the ETF in that chamber, said that he would like to look at funding the trust fund.
He said that a new revenue stream would be necessary for a COLA. Orr said gambling was a possible example. Garrett said it would not be enough for ongoing COLAS in a meaningful way.
Retirees, meanwhile, are doing what they can. Stacey Besherse, 50, retired last year after 26 years in Huntsville City Schools. When she signed on, she was sold on the idea that she’d have a stable retirement with regular cost-of-living raises.
“That was the incentive to work for Alabama public schools. It was such a great retirement program,” she said.
But her retirement check alone can only cover monthly bills, including the $900 monthly cost for her family’s health insurance.
She said she is lucky to have spousal support and other income streams, but many of the retired teachers she knows don’t have the same level of support. She takes a group of older retirees out to lunch every month, where many have told her that they can barely afford rising medical costs, she said.
“They retired with what they thought they were going to be able to live on,” she said. “And I’ve watched them share meals with each other at lunch and I’ve watched them scrape their leftovers for dinner that night, because they’re on really fixed incomes.”
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