{"id":3135,"date":"2013-03-02T14:34:45","date_gmt":"2013-03-02T20:34:45","guid":{"rendered":"https:\/\/trta.org\/?p=3135"},"modified":"2013-03-02T14:34:45","modified_gmt":"2013-03-02T20:34:45","slug":"special-update","status":"publish","type":"post","link":"https:\/\/trta.org\/es\/special-update\/","title":{"rendered":"Special Update"},"content":{"rendered":"

Pension Funds Are Not in Crisis<\/strong><\/p>\n

QR Interview with Pensions Chairman Bill Callegari<\/strong><\/p>\n

TRTA Members,<\/p>\n

Below is a story that appeared on the Quorum Report web site. The Quorum Report is an online political column and is operated by Harvey Kronberg. Their web site is http:\/\/www.quorumreport.com\/.<\/p>\n

This particular story is a Q&A session with new House Pensions Committee Chairman Bill Callegari. The story is written by reporter John Reynolds and originally appeared on the Quorum Report web site on March 1, 2013.
\nTRTA has met with Chairman Callegari and we know that he is taking a good look at the state pension plans. In particular, we know he is very aware of the funding challenges that TRS has struggled with. TRTA knows that 15 out of the last 18 years, the Texas Legislature chose to underfund the TRS pension fund. If the state would have maintained its 7.31 percent contribution that it reduced to 6 percent in 1995, TRS would have approximately $7 billion more in pension trust fund. It would also be actuarially sound.
\nNow, TRTA continues to fight against the idea that there is a pensions crisis in Texas. We are also working to improve the actuarial soundness of our pension fund, get retirees an increase, and protect our health care.
\nIt is clear from this interview with Pensions Chairman Bill Callegari that this is a person who respects facts over rhetoric. Thank you Chairman Callegari for your service in the Texas Legislature.<\/p>\n

 <\/p>\n

 <\/p>\n

March 1, 2013 3:44 PM<\/p>\n

 <\/p>\n

A QR Q&A WITH HOUSE PENSIONS CHAIRMAN BILL CALLEGARI<\/p>\n

 <\/p>\n

The newly installed chairman tasked with one of the House\u2019s more important legislative portfolios shares his thoughts on whether the state\u2019s public pension systems are in crisis. Spoiler alert\u2026 he doesn\u2019t think so.
\nHouse Pensions Chairman Bill Callegari (R-Katy) sat down this week with QR to talk about his steep learning curve as the new guy holding the gavel in one of the chamber\u2019s most important standing committees.
\nIn our talk, he said, for the most part, public pensions are in good shape and he discounts talk that they are in the type of crisis that has led towns in other states like California to declare bankruptcy.
\nThe systems \u201cI\u2019ve seen thus far are in reasonably good shape,\u201d Callegari said in our interview. \u201cThere\u2019s some in not so good shape. None of them I would consider in crisis at this point. But my drive is going to be to try to get them to the point where they\u2019re unquestionably not in crisis.\u201d<\/p>\n

And he pretty convincingly put the kibosh on speculation that lawmakers might look at moving the state\u2019s employee and teacher retirement systems away from their current defined benefit plans this session.
\nWe reprint below the entirety of our Q&A with Callegari:
\nQ: When Pensions was set up this session, there was a lot of reorganization because you split Pensions basically into two. And, of course, you\u2019re new to Pensions. If you could just tell me a little about the learning curve from your perspective?<\/p>\n

A: Well, it\u2019s been very interesting because, you know, I didn\u2019t know a whole lot about Pensions except kind of a nominal knowledge that most people have and having dealt with it to a small extent in my business in past years. I had a general feel for what it\u2019s all about but a lot of the details about pensions, particularly state pensions, I just didn\u2019t know. So it\u2019s been a real steep learning curve. It\u2019s been good on the other hand because it makes you dig into things \u2026 when you realize you don\u2019t know anything, you dig a little deeper than you would otherwise. And I think it\u2019s been very helpful. I find the same thing with the rest of the committee. The entire committee is new to Pensions and I think they\u2019ve all tried to dig in and learn some things they didn\u2019t have before and I think having a new group of people involved \u2026 anytime you look at anything with fresh eyes you see things that people before didn\u2019t see or overlooked because they heard it so many times. So I think from that standpoint, it was probably \u2026 more positive than I would have thought if I had been asked before I was appointed.<\/p>\n

Q: We\u2019ve seen one of you bills now already in committee, HB 13, which you are basically carrying (Comptroller) Susan Combs\u2019 transparency agenda for public pension systems. I was going to ask you aside from that, what you see as kind of the big components of your agenda for Pensions this session<\/p>\n

A: Well, you know, one of the both problems and advantages of having been appointed to it more or less at the last minute is I don\u2019t have any preconceived ideas of what I ought to do. It became apparent to me very early though that even though our pensions, most of our pensions, are in relatively good shape, there are some concerns. And it didn\u2019t take long to pick up on some of the indicators. For instance, one of the main indicators that they use is fund ratio. And fund ratios, you know, the common thinking seems to be that if fund ratios is above 80 percent, it\u2019s OK. Well, my observation after studying it a little while is that\u2019s probably not the way it started. My observation is it probably started with the actuaries making a comment that if your fund ratio is below 80 percent, you may be in trouble. I think over the years that\u2019s been kind of flipped around to say if you\u2019re above 80 you\u2019re OK. And it\u2019s not the same thing. So I worry about pensions that, you know, think that if I\u2019m at 80 percent, I\u2019m OK. And particularly, one of the other great measures is amortization period. If my amortization period is 30 years or less, I\u2019m OK. Well, you know that may be an OK position, but it\u2019s not the desired position. So I have determined pretty early on that we want to drive to a couple of things. I want to get as many pensions as we can closer to or even above 100 percent and I want to get the amortization rates down to zero if possible but certainly well below 30 and, you know, again to ultimately get them to zero so that our pensions are healthy and they can do what they need to do. And then let the earnings give them the ability to get the cost of living adjustments or whatever they need to do.<\/p>\n

Q: What would be the legislative tools available to the committee to do that?<\/p>\n

A: Well, it varies with every type of pension quite frankly whether it be the employees pension or the teachers pension or whether it be firemen or, you know, the county system or the city\u2019s TMRS (Texas Municipal Retirement System) \u2026 each one has its own characteristics, if you will. But for the most part, I think everybody needs to look more closely at the vesting period. Make sure that they\u2019re broad enough to where the people who deserve the pensions get them but there was one, for instance, that allowed vesting in it at a certain age and with just five years\u2019 experience at one time. Well, that\u2019s too limited. So I think they need to look at that. But you look at vesting periods. You look at such things as, you know, who\u2019s making contributions or are the contributions being made on a regular basis? And what can we do to level those out and make sure that the contributions match where they have to be in the future? And I think there\u2019s some that are very healthy from that standpoint, particularly a lot of the municipal systems where there\u2019s pretty good contributions from both the employees and the cities. I think in some of the areas like in teacher retirement, I think there is probably a need for us to increase our contributions from the state side for teachers. I think at the same time, though, and there\u2019s been some discussion about that, I think, among the teacher groups. And they\u2019ve talked about, you know, if we can get an increase \u2026 on the state side, maybe we would ask the teachers to contribute a little more, too, everybody contributing a little bit to the long range viability of those pensions.<\/p>\n

Q: Well, that\u2019s rather important and I guess I would ask, are you going to be carrying legislation on that?<\/p>\n

A: I am working very closely with, and understand that this has been just barely over three weeks. So we\u2019re still getting our feet under us. But, yeah, I\u2019m talking to those pensions, the employee pension, the state, you know, the teacher pension \u2026 talking to them about recommendations that they might want to make regarding those issues. There is some legislation that has been introduced by others that will increase state contributions. So we\u2019re starting in that direction.<\/p>\n

Q: One of the things that we constantly hear during the interim and we heard it as well in the hearing on Monday, the talk of pensions systems in crisis. Invariably you hear mention of out of state systems. Is it your perception that Texas pension systems are in crisis?<\/p>\n

A: No, my perception is that for the most part those that I\u2019ve seen thus far are in reasonably good shape. There\u2019s some in not so good shape. None of them I would consider in crisis at this point. But my drive is going to be to try to get them to the point where they\u2019re unquestionably not in crisis. And that means driving towards those key indicators \u2013 a 100 percent funding \u2026 10 or less years amortization rate \u2013 to really make sure that we\u2019re in a very healthy position so that if we have a market crash, we\u2019re at a point where if we fall off, we don\u2019t fall off very far. What you have to realize is that it only takes one day to lose 20 or 30 percent of any kind of fund, whether it is pension or anything else. It takes years to build it back. And that\u2019s what we have to be prepared for. I would say that I don\u2019t think we\u2019re in crisis but I think we have to make sure that we start right now to be sure that we\u2019re not in crisis. And there are two ways to do this. One is by legislation. We\u2019ll do some legislation. But also just providing the leadership to tell them this is where you need to be. If you don\u2019t get there, we\u2019ll make you get there. We\u2019ll give you a chance to get there first. That\u2019s the way I tend to do things and what I want to strive for is give them the opportunity to do what they have to do. And if they don\u2019t, I think we have to look at legislation.<\/p>\n

Q: One final question keying off again on the crisis question. Outside groups have leveraged this idea of pensions systems in crisis to advocate some very fundamental changes to the way pensions are dealt with. Moving from, again, defined benefits to defined contributions. From your perspective, do those types of reform efforts have any legs this session?<\/p>\n

A: Well, I don\u2019t think they will this session. Some of the pensions, like the TCDRS (Texas County & District Retirement System) and TMRS, have already gone to a cash balance plan. That has some elements of both, you know, the 401(k) approach and permanent, I\u2019m trying to think of the right word, amortized pensions. They\u2019ve got kind of a two-tier system. In terms of the state ERS and TRS, I don\u2019t think we\u2019re ready to even think about doing that. You know, I think there\u2019s a real desire to try to keep those pensions as they are now, which are defined benefit processes. We just need to make sure that we beef up on the other side, the contribution side, to make sure we get there. And that they continue to be and maybe even get more conservative on the discount rates that they\u2019re using to be sure that we\u2019re tracking what\u2019s happened today. You know, you look at these things over a long term period. So you look over 30 years and the history may be good. But I\u2019m going to encourage them to start looking more specifically at more recent years and be aware that things can change much more rapidly in today\u2019s world than it may have, you know, 30 to 40 years ago. And we just have to be very cognizant of that. And watch it both, I mean you still have to look at long term because that\u2019s the way you invest. But you\u2019ve got to know what\u2019s happening in the short term so that you\u2019re using the right percentages and amortization rates.<\/p>\n

Q: I think that should about cover it. Do you have anything else that you would like to add?<\/p>\n

A: No, just that I think there\u2019s a lot of interest in that subject. I think Texas has done a really good job. The pensions in Texas have done a pretty good job of trying to stay viable. I know a lot of them have made changes in the past few years that have helped their situation and we just want to make sure they keep looking and never forget that the long term viability of the pension is the most important thing.<\/p>\n

 <\/p>\n

By John Reynolds<\/strong><\/p>\n

 <\/p>\n

Copyright March 01, 2013, Harvey Kronberg, www.quorumreport.com, All rights are reserved<\/strong><\/p>","protected":false},"excerpt":{"rendered":"

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