Texas teacher retirees, you aren't the only ones concerned!
"The report states that the pension’s actuaries would favor a stair-step increase in state and employee contribution rates over the long term."
"But teacher groups don’t like the idea of increasing contributions from employees."
"At this point, we would say that the teachers contribute an adequate sum already,” said Derik Hayenga, chief of staff for the United Educators Association in Fort Worth. "The state needs to step up with their portion."
Texas teacher pension shortfall is billions worse than expected
On Friday, state lawmakers were soberly assessing the report, which showed that the pension’s unfunded liabilities have more than tripled in six months, to $40.4 billion from $11.5 billion. That shortfall will eventually have to be made up, or in the long term the pension won’t be able to meet its obligations to all its members.
Overall, from Aug. 31 to Feb. 28, the fund’s value declined about 32 percent, the report states.
The news shatters hopes for a cost-of-living adjustment for hundreds of thousands of retired Texas public school employees. What’s more, lawmakers will be forced to consider increasing contributions from active members and from the state to shore up losses, one key lawmaker said.
"Candidly, I’m not optimistic," said state Rep. Vicki Truitt, R-Keller, chairwoman of the House Pensions, Investments and Financial Services Committee.
"My No. 1 goal is to preserve and grow this fund so it will be here for the members," she said after the report was released. "We’re just in a very difficult time right now."
Pension officials warned legislators for weeks that fund values had dropped significantly. The expectation was that the fund’s value had fallen to $80 billion, from about $104.9 billion last year. So the current estimate was shocking to many.
"I didn’t know it was going to be that bad," said state Rep. Marc Veasey, D-Fort Worth, who is also a member of the Pensions and Investments Committee.
The fund’s value stands at $70.6 billion, the report shows.
"When we saw 70.6 . . . it was definitely a more eye-opening perspective based on what we’ve been hearing in the last couple of weeks," said Tim Lee, executive director of the Texas Retired Teachers Association. "It hurts."
At this time, officials stressed, the fund is healthy enough to pay retirees.
"In the short run, the fund is sound," Truitt said. "Retirees do not need to be concerned about whether or not they will be receiving their annuities."
It is the fund’s future that’s at stake.
The Teacher Retirement System has at least 1 million members, including retirees and active employees. The fund makes its money from employee and state contributions and investment earnings. If it could earn a steady 8 percent return on investments in the future, it would have enough assets to cover its obligations through 2040, according to the report.
If that doesn’t happen, the other sources of funding will have to be tapped to keep the fund sound.
Active employees now contribute 6.4 percent of their pay to the fund; the state contributes a rate of 6.58 percent of employees’ pay.
"These contribution levels are no longer adequate to fund TRS’ future liabilities," according to the report by Gabriel, Roeder, Smith & Co., the pension’s Irving-based actuarial firm.
The employee contribution rate hasn’t changed in two decades; the state increased its contribution in 2007 after more than a decade. There have been suggestions during legislative discussions to reduce it, Lee said.
The report states that the pension’s actuaries would favor a stair-step increase in state and employee contribution rates over the long term.
But teacher groups don’t like the idea of increasing contributions from employees.
"At this point, we would say that the teachers contribute an adequate sum already,” said Derik Hayenga, chief of staff for the United Educators Association in Fort Worth. "The state needs to step up with their portion."
Friday’s announcement seems to have killed efforts by teacher groups and some legislators to provide a cost-of-living adjustment for retirees. They haven’t had one in eight years.
Another bill, filed by state Rep. Craig Eiland, R-Austin, would grant retirees a one-time supplemental payment this year. In 2007, legislators approved a bill that provided a 13th check to retirees.
Veasey said he still wants to make it a priority.
"If we don’t do the right thing by the teacher retirees, it’s really going to make it harder for us to recruit new teachers," Veasey said. "They need some help."
As for retirees, they are paying close attention to what’s going on in Austin.
"Certainly, retirees would accept another 13th check," said Bill Barnes of Fort Worth, state legislative chairman for the Texas Retired Teachers Association.
posted by Kathie Bracy at 3:41 PM
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