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Legislative Updates

Legislative Update No. 122, Session 80
By Tim Lee, Executive DirectorPrinter Friendly ||| Print as PDF

January 7, 2009

Senate Finance Action Sets Stage for Coming Session
Pension Fund Investment in State Toll Road Projects Discussed
The Texas Retired Teachers Association (TRTA) has received many phone calls, emails, and letters about the idea that the Texas Legislature may force the Teacher Retirement System of Texas (TRS) and other state pension funds (namely the Employee Retirement System) to invest in Texas infrastructure projects – particularly, Texas toll roads. Today, the Texas Senate Finance Committee discussed this very issue.
The Senate Finance Committee interim report addresses the creation of the Texas Transportation Finance Corporation. Senate Finance Committee Chairman Steve Ogden laid out the conceptual formation of this Transportation Finance Corporation as an “opportunity” for the state pension funds to capitalize that new toll road corporation so that it may then invest in toll road projects around the state. In other words, TRS and ERS would invest their pension fund dollars in this new state company so that it may then use those dollars to build toll roads.
Though many TRTA members have expressed their opinion on pension dollars being used to pay for toll roads, it is important to continue our discussion on key points regarding this issue. TRTA members need to know that:
·         TRS already has the authority to invest in infrastructure investments locally, throughout the United States, and around the world, including toll roads here in Texas;
·         In fact, TRS presently has infrastructure investments totaling about $600 million;
·         The two current TRS investment partnerships are with Babcock and Brown and Morgan Stanley Infrastructure, and TRS may choose to invest in Texas infrastructure through partnerships with investment groups such as these;
·         Infrastructure investments are made as part of the overall TRS asset allocation, which makes up a very small percentage of the overall fund portfolio. TRS infrastructure investments are classified as “Other Real Assets” in their asset allocation policy; the target for this class is only 5 percent of the total fund.  Further, of that 5 percent, infrastructure projects are a small part of that total asset class;
·         Any investment TRS makes must be made in the best interest of the TRS members. It is the responsibility of the TRS Trustees to make their investment decisions without undue political influence.
With that said, TRTA does not presently see the value in creating a state Transportation Finance Corporation for the purpose of allowing the state pension funds to assist in building Texas toll roads.
Senator Kevin Eltife spoke strongly against the idea of borrowing money from the pension funds as a way to solve the Texas toll road or infrastructure needs. “I see this as a really bad idea,” Eltife said as he suggested the ultimate problem in paying for Texas infrastructure was not solved by borrowing the money from Texas pensioners. He posited that Texas has not properly funded the Texas Department of Transportation with the money to pay for these projects with cash instead of issuing additional state debt.  Senator Eltife has written a letter expressing his viewpoint on this issue; TRTA will provide the letter to members as soon as it is available.
Senator Robert Duncan commented that this issue may be stigmatized as a way to influence the State pension funds to invest in state infrastructure projects. He stated that he was opposed to the funds being influenced by the legislature, the Governor, or any political office to make any specific investment, and that it was his understanding the creation of this Transportation Finance Corporation would make it possible for any private or public investor to invest in Texas infrastructure or toll road projects.
TRTA is not opposed to the idea of public or private investment in Texas toll roads or other infrastructure, but is opposed to, as Chairman Ogden said when introducing this topic, Texas state pension funds capitalizing the new fund.
IF (and this is a big IF) TRS chooses to make investments in Texas infrastructure as part of its asset allocation, it would have to be weighed against all other infrastructure projects TRS may be considering the world over and must prove to be the best investment for its total portfolio.
TRTA does not believe TRS should be viewed as a way to “capitalize” Texas infrastructure products. It is the responsibility and requirement of the Teacher Retirement System Board of Trustees to make the best investment decisions solely on behalf of the fund’s members.
Other comments made by Senate Finance committee members echoed the idea that TRS can already invest in Texas toll roads or other infrastructure projects and that the absence of a state-founded finance corporation was in any way an impediment.
TRTA members should be ready to contact their legislators about this issue in the coming session. After today’s hearing, it is clear that the issue will not go away. It must be made clear that TRS has to be able to determine its own investment decisions without undue political influence.  TRTA will follow this issue very closely all session and will keep you updated with any new developments.
How Bad are the Pension Fund Losses? “Terrible?”
Senator Jane Nelson posed a question during today’s hearing, asking about the general condition of the state pension funds and their performance in this down market. Without much hesitation, Chairman Steve Ogden said the funds are doing “terrible.”
There’s no question that the funds have been hit hard, but Senator Tommy Williams wanted to set the record straight by explaining that the funds are only down about 22 percent, while the broader markets are down by more than 45 or 50 percent.  Senator Williams urged his colleagues to not be rash, but rather, to be careful about saying the funds are doing “terrible” when, given the volatile investment environment, things could be much worse than they are.
TRTA echoes Senator Williams’ sentiment and congratulates his quick response to say that, though things are not good, the pension funds are outperforming the major markets and are working to do the best they can given the circumstances.
TRTA knows that this will be a difficult session and that many legislators may shy away from the idea of doing anything for the pension fund or education retirees citing the current market condition. Now is the most important time to commit necessary funds to the TRS pension fund so that it does not fall even more in its overall funding status and so that it can capitalize on the market when it does begin to improve. Now is the time to help education retirees who have not had a pension increase in over 8 years.
TRTA knows things could be better, but not helping education retirees or improving the funding for the TRS pension fund would, indeed, be terrible!
Conclusion
Next week is the start of the 81st Legislative Session. TRTA is ready to represent you and be your voice with the Texas Legislature.  Since the last legislative session, TRTA’s membership has grown to its highest level ever, now with more than 68,000 members!  It will take all of us working together to accomplish TRTA’s goals this session.  In truth, TRTA needs even more voices in addition to our already loud grassroots lobby of 68 thousand people.  Think about how much more influential TRTA could be with 10 or 20 thousand more members!  We all know someone who will benefit from your efforts to secure a benefit increase for education retirees this session.  If you have the chance, remind your friends and family how important and challenging this session will be. Ask them to join the most powerful lobby in Texas representing education retirees.  We need their help and support.
TRTA is very grateful for your involvement and genuine interest in these issues. As session begins next week, there will be many updates asking TRTA members to make phone calls, send emails, and be in contact with their legislators. 
Your support in these efforts is vital to TRTA’s success. We are one of the most respected organizations working in the Texas legislative process because our members are so informed, articulate and eager to educate decision makers about retirees’ needs and real issues impacting their daily lives.  I am confident that, with all of us working together, TRTA will again have a successful session and continue to solidify its position as the champion voice for all education retirees.
On behalf of the TRTA Board of Directors, the TRTA State Legislative Committee, and the entire TRTA Legislative Team, we look forward to serving you this session.
 

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