08.02.06

Are Texas Public Employee Pensions Next On GOP Hit List?

Posted in Around The State, The Lege at 1:59 pm by wcnews

This question is brought up because of some recent developments. First this article, State pensions expecting gains from investments to be smaller, in last Saturday’s SAEN. The article brings up several points.

“The days of benefit enhancements and cost-of-living adjustments (state) retirees enjoyed are gone,” said Mary Jane Wardlow, spokeswoman for the Texas Employees Retirement System. “Besides, the system wasn’t designed for benefit enhancements. It can’t be supported automatically by the trust.”Plus, the Texas Constitution bars cost-of-living raises as long as the pension plans for teachers and state employees have insufficient money to cover current pension promises, that is, they’re underfunded.

That’s how the article starts. No more cost-of-living increases for state retirees and their pensions are underfunded. That seems like it would have been a much better headline. So why is this the case?

As with many states, a huge chunk of Texas’ shortfall of $15.04 billion stems from elected officials not contributing what’s recommended by actuaries. The teachers and employee retirement systems, however, are covered by constitutionally mandated minimum contributions.

“In the late part of the 1990s, there were people at the Capitol who said there was no doubt they would have cut contributions to zero if they could have gotten away with it,” said Keith Brainard, research director at the National Association of State Retirement Administrators, which monitors public pensions across the country.

Legislators bumped Texas’ contribution to the Employees Retirement System from 6 percent to 6.45 percent last year to meet current costs for the first time in 10 years, so now that fund is “treading water,” said Wardlow, the system’s spokeswoman.

The result is that state employees are footing more of their retirement than public employees nationwide, Brainard said. Where most government pensions contribute twice as much as employees nationwide, Texas roughly matches the employees’ savings.

Also adding to the shortfall is that while they were cutting contributions, many legislators changed pension benefits in ways that added costs.

For instance, a buyout among state workers left the Texas Employees Retirement System with fewer active workers paying into it.

We can probably safely assume what party those people were from that wanted to “cut state contributions to zero if they could..”. The article finishes up with some analysis of what the future holds for these pensions and let’s just say it’s mixed.

This is just mirroring corporate America’s new found boon, in reneging on pension benefits to retirees when they file for bankruptcy. If our current one-party rule in Texas is left in tact for much longer once their current school finance sham’s reality comes to light then they’ll be coming after pubic employee pensions. And not just taking away “enhancements”. Here’s a proposal from Alaska, it similarly to Texas has an all Republican government:

In Alaska, state employees vowed to challenge a new pension system that not only reduces benefits but forces workers to pay taxes on both their contributions to the plan and the state’s. The situation arose after the state legislature adjourned its regular session earlier this month without approving a bill that would clean up technical problems with a controversial switch from a defined-benefit pension plan to a defined-contribution plan, which lawmakers approved in 2005. The proposed changes were largely designed to ensure that the new plan complied with Internal Revenue Service codes and regulations. The House tacked onto the fix-it bill a one-year delay in implementing the new retirement plan. The Senate stripped the delay provision from the bill.

Republicans wanting to add new taxes, that’s amazing. These pensions are a contract that the state entered into with it’s current and former employees and that contract should not be broken. The main reason all of this is being brought up is because this TFT Legislative Hotline alerts us to two hearings next week by the House Pensions and Investments Committee. Here’s the agenda:

The committee will consider the following interim charges;

1. Study the role of actuaries in monitoring the financial health of public pension plans, and evaluate the need for regulation in regard to their qualifications, the setting of actuarial assumptions and oversight.
2. Evaluate the criteria which would be provided to the Pension Review Board that would signal a major change in the financial condition of a public pension system, including the necessary data, frequency of reports, costs to the system and its source of funding.
3. Examine the feasibility of facilitation the creation of a large, consolidated risk pool and other strategies to give governmental entities statewide relief from high premiums for health care benefits for employees and retirees.
4. Review the eligibility criteria for the Law Enforcement and Custodial Officers Supplemental (LECOS) retirement program and the impact of these guidelines on funding needed for the pension fund.
5. Analyze the impact of targeted investment strategies on state retirement funds.
6. Review the Proportionate Retirement Programs and their effects on state pension funds.
7. Monitor the agencies and programs under the committee’s jurisdiction.

It would be wise for all current and former state employees to keep an eye on these hearings.

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