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Legislative Updates

Legislative Update No. 11, Session 80
By Tim Lee, Executive DirectorPrinter Friendly ||| Print as PDF

January 31, 2007

Early Discussions on TRS Make for Optimistic Outlook

 

Talks Suggest Fund Soundness and Ad Hoc Increase May be Closer than Once Thought

 

The House Appropriations Committee listened to testimony from Ronnie Jung, TRS Executive Director, on the System’s budget request for the coming biennium.  Though the original focus of the meeting was on the Legislative Budget Board’s budget recommendation, the discussion quickly changed to how soon the pension fund would be actuarially sound and an annuity increase for retirees would be possible.

 

The LBB is recommending a 6.4% State contribution to the TRS pension trust fund.  This is an increase of 0.4% over the last biennium, and the first increase in TRS funding since 1995. 

 

The overall increase in new state dollars for TRS is about $539 million.  Of that, $200 million represents the increase in State appropriation.  The other $339 million correlates with the growth in state covered teacher payroll. 

 

Legislators wanted to know more about the pension fund’s overall ability to provide an annuity increase for retired educators.  A number of representatives (including Ryan Guillen, Dan Branch, Dan Gattis, Lois Kolkhorst, Sylvester Turner, Jim Jackson, Eddie Lucio III, and others), asked very direct questions about pension funding and how best to provide a pension increase for retirees.

 

The conversation focused more so on a true ad hoc raise (or a permanent increase to a person’s annuity) versus that of a 13th check (or a one-time increase), a sign that legislators are, at minimum, open to an ad hoc raise when just a session ago it seemed such consideration was unthinkable.

 

TRS testified that the strong market gains are having a substantial impact on improving the condition of the fund.  TRS will perform another actuarial evaluation at the end of February that will provide a clearer picture on the fund’s condition.  If markets continue to perform favorably over the next 30 days, it is likely that the TRS actuarially required state contribution (ARC) to make the system actuarially sound will be less than 7 percent. 

 

This is excellent news for all TRS annuitants and its relevance should not be overlooked by any TRS member or elected official.  The TRS Board of Trustees and staff are all to be commended for their role in helping keep the investment return as high as they have been over the past four years.  As a side note, Gregg Poole, TRS Trustee who serves as one of the TRS active educator members on the TRS Board, attended this morning’s hearing.  Trustee Poole has always been a champion for improved TRS benefits for retired educators, and his listening to today’s hearing is certainly appreciated.

 

As the system’s financial condition continues to improve, TRTA members should keep in mind that these are very preliminary estimates and that market changes could certainly impact the fund’s ability to recover enough to provide a pension increase for retirees.  The good news is that market performance has helped the pension trust fund improve and that getting to a point of actuarially soundness may happen sooner than later and with a lower state contribution than originally thought necessary. 

 

Getting the fund actuarially sound opens the way for the legislature to consider benefit increases for retirees, and this is what legislators were focused on at today’s hearing.

 

TRTA members are doing a tremendous job educating and lobbying their legislators.  It was clear just by the questions being asked that TRTA members are having a major influence on their elected officials, and that this is being done in a positive and productive way.

 

As the session continues, keep communications with your legislators ongoing and encourage them to support initiatives that help get retirees some help this session.  A number of proposals are being discussed, and it is too early to say which of those proposals may have a more realistic chance of passing than the others, but it is critical that TRTA members continue to talk to their legislators and do so in a thoughtful, productive, and agreeable manner.  Clearly, this is how TRTA member’s efforts are being viewed by legislative members and it is making a difference on the sense of urgency that legislators have to deal with this situation. 

 

The news today represents a very positive step forward at this early point in the legislative process, and TRTA will continue to press these issues throughout the session.  TRTA is preparing a fact sheet for members to present to their legislators on this issue.  That paper, when finished, will be sent out through the Inside Line (due to the specificity needed for this document, its development may be slowed due to new numbers being generated by TRS as part of the upcoming actuarial valuation). 

 

Please contact Tim Lee with any questions at tim@trta.org.

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