Many state pension systems around the country are in crisis mode, as they face extraordinary budget deficits and a "no new taxes" attitude among the public. Texas is in better shape than most, due in part to constitutional protections that mandate a minimum state contribution for the Teachers Retirement System and Employees Retirement System.
Nevertheless, some lawmakers and advocates want to look into new ways to approach pensions and health care for public employees. A recent article in the Austin American-Statesman by Kate Alexander explores the issue.
"The Legislature owes it to taxpayers to examine whether the guarantee of a lifetime retirement check is still affordable, said Talmadge Heflin, director of the Center for Fiscal Policy at the Texas Public Policy Foundation, a conservative think tank. Mr. Heflin is a former chair of the House Appropriations Committee.
Such statements may resonate more deeply with members of the Teachers Retirement System than with participants in the Optional Retirement Program (which is a "defined contribution" plan). However, one variable to watch carefully is the state contribution rate for ORP, which does not enjoy the same constitutional protection as TRS. Also, all community and technical college educators participate in health coverage provided by the state through the Employees Retirement System.
Regarding health care, it is probably prudent to expect the Legislature to revisit co-payments and deductibles, and perhaps the eligibility of retirees who wish to receive benefits before they qualify for Medicare. In 2003, during the last Session with a severe budget deficit, the Legislature raised the premiums dramatically for dependent coverage.
Also from the AAS piece:
A 1975 amendment to the Texas Constitution required the state — and active members — to contribute at least 6 percent of the relevant payroll to each of the Employees Retirement System of Texas and the Teacher Retirement System of Texas.
"Without strong constitutional safeguards, state officials facing a budget gap as huge as that which Texas now confronts might well choose to balance the budget through the politically expedient path of undermining public retirement plans rather than making tough decisions on taxes and spending," said U.S. Rep. Lloyd Doggett , D-Austin, who wrote the amendment as a state senator.
Under Texas law, retirees cannot get a benefit increase unless the pension funds have the assets necessary to cover their long-term obligations.
Much to the frustration of current retirees, the last time they got a bump in their monthly checks was 2001 , before two recessions in a decade took their toll on the funds' investment returns.
Unlike many states, Texas has never enacted an automatic yearly cost-of-living increase. Several other states, such as Colorado and Minnesota, are embroiled in lawsuits filed by retirees after lawmakers tried to roll back those annual increases.
The checks on both the state and the members have helped keep Texas' two biggest pension funds from falling into a deep, seemingly insurmountable hole.
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