Article: (Texas) Growing teacher fund shortfall means no benefit increases

By Robert Elder
Austin AMERICAN-STATESMAN STAFF
Monday, December 05, 2005

The shortfall in the pension fund for retired Texas teachers soared to $13.2 billion, virtually guaranteeing that retirees, who haven't had an increase in benefits since 2001, won't see one for the rest of decade.

The $93.7 billion Teacher Retirement System of Texas, one of the world's largest pension funds, pays benefits to nearly 250,000 retired public school employees. Another 867,000 school employees, and some personnel at state universities, are active members of the system.

As of Aug. 31, the end of the state fiscal year, the TRS had $13.2 billion less than it needs to cover the pension fund's promised benefits over the next 30 years. The shortfall grew by $2.2 billion in the last six months of the fiscal year and by $5.2 billion for the full year.

Benefit payments are not in any danger in the near term.

But the shortfall is still bad news for retirees. State law prohibits an increase in benefits as long as the plan is underfunded.

The system's board of trustees will take up the report in Austin on Thursday. Houston lawyer Jarvis Hollingsworth, the board chairman, said he is concerned about the financial well-being of retirees.

"Nobody wants to see . . . an increase for our annuitants more than this board," he said.

At the same time, Hollingsworth said, the Legislature has "a number of priorities" and interests competing for extra funds.

The shortfall grew despite solid investment returns: The TRS portfolio returned 14.4 percent in fiscal 2005, earning nearly $12 billion.

But the shortfall deepened because of the peculiarities of pension-fund accounting. Pension funds realize gains or losses over as long as five years, and the system still is recognizing the negative returns of the 2001-02 bear market.

The last of those negative returns will hit the TRS books by Aug. 31. And they will be offset by about $4.4 billion in more recent gains that will be accounted for over the next four years.

Still, the system's outside actuary warned against granting any benefit increases "over the next several legislative sessions."

relder@statesman.com; 445-3671