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New State Fiscal Year Means Less for TRS, Fight over Defined Benefit Plans Looms, Anita Palmer Appointed as Retiree Representative on TRS Board

After time off to recoup from a busy legislative session, the TRTA Inside Line email service is now resuming. We plan to communicate with you every other week, and more often as the need arises. There is a lot going on in the public pension community and we will touch on a few of these items today.

New State Fiscal Year Means Lowered Contributions for TRS

First, let me be one of the first to wish you a Happy New Year! As you know, the new state fiscal year begins today (September 1, 2011). Many state agencies will feel the impact of deep reductions in programs and services due to the lowered budget amounts (commonly referred to as the “cuts-only” budget) approved last legislative session.

This includes the Teacher Retirement System of Texas (TRS), which will have its state contribution reduced from 6.644 percent to the constitutional minimum of 6 percent.

Thanks to TRTA members working hard all session, the budget picture will get better for the TRS fund in the second year of the biennium when the state will increase its contribution to 6.4 percent. Many will remember this as part of the “Duncan plan,” a measure spearheaded by Senator Robert Duncan (R-Lubbock) to insulate the fund as much as the legislature would allow. This plan is also an attempt to remain committed to a law passed in 2007 that ruled the state contribution shall not be less than the active member contribution. Since the early 1980’s, the active member contribution has been 6.4 percent and remains the same in the coming biennium.

The last few weeks have been challenging for TRS due to large swings in the markets. The fund hit a low of about $67 billion in assets in 2009, earning back most of those losses with a much improved fund balance above $110 billion. The market has taken some of those gains back, bringing the fund value down to an estimated $105 billion (this number varies depending on the market’s daily activity).

All things considered, as we enter the new fiscal year and new biennium, the TRS pension trust fund is strong, healthy, robust and steady. Many critics of defined benefit plans like to insinuate that the advantages of defined contribution plans (such as 401-k style plans) are much better for employees as they offer “portability” and self-directed investment decisions. To those critics, TRTA can and will offer many reasons why the defined benefit plan is superior and more cost efficient than the defined contribution alternative. Perhaps one of the most significant differences for all active and retired Texas public educators is that TRS retirement benefits are safe, paid on time and provide a good benefit at a low cost.

So, if it’s not broke…let’s just get rid of it!

This week, Austin American-Statesman reporter Kate Alexander published a story about a battle brewing over the defined benefit versus defined contribution retirement benefit for public employees. Click here to read the story.

The bottom line is that some very wealthy private sector business leaders do not believe public pension plans are working and cost the state too much money. One of the people in the story attacking public pension plans is a Houston lawyer named Bill King. He is forming a coalition of private sector business professionals to advocate for the elimination of defined benefit plans. Mr. King noted that he did not believe these efforts may have a significant impact in the upcoming elections, but he does hope his new coalition will play a prominent role in the next legislative session.

TRTA members are familiar with these attacks: we fought against legislation filed this past session to eliminate the defined benefit plans! One group, the Texas Public Policy Foundation, is also advocating for the elimination of these plans–including the Teacher Retirement System. It is important to note that a number of Texas Public Policy Foundation staff leaders are retired legislators who do, or will, receive a defined benefit for their service in the Texas Legislature.

During session, TRTA pointed out that many of the arguments that are used by those attacking public pension plans are flawed and that transitioning our large state public pension plans into 401-k benefit programs will NOT save the state any money and WILL cost more if change is implemented. Additionally, over 80 percent of all public education retirees and active employees are not covered by Social Security.

The effort to eliminate the defined benefit plan for education employees needs to be exposed for what it really is: a money-grabbing effort to force active school employees into private sector investment programs with high-cost money managers that want access to this revenue to improve their commissions and bottom lines.

For over 70 years, the TRS pension trust fund has provided retirement security for Texas education employees and retirees. The fund is in good shape and although we can think of ways to improve benefits for our very deserving retired school employees, there is no reason to eliminate the current benefit structure. That does not mean that these efforts will be put down easily. We MUST be ready to defend our TRS plan now and in the future.

TRTA will not rest in our efforts to protect your TRS pension trust fund. We are building new coalitions, gathering factual information and meeting with as many legislators as possible to ensure that the efforts to eliminate the defined benefit plan fail. Please talk to your friends, fellow retirees, active school employees, colleagues and family members about joining us to defend the TRS pension system.

Big News for TRS Retirees

This week, Governor Rick Perry announced the appointment of Anita Palmer as the new retiree representative on the Teacher Retirement System Board of Trustees.

Anita is one of three candidates that ran for the TRS retiree position and was the top vote-getter in that election. She is a long-time TRTA member with a diverse background helping and serving public education retirees and active school personnel. Anita has served on a number of TRTA state committees and works tirelessly in her district and local unit.

Anita’s 6-year term begins this month.

Congratulations Anita! We look forward to working with you in this new position. Click here to read the Governor’s release on all the TRS Board of Trustee appointments.

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The special legislative session has ended, with the House adjourning sine die on Wednesday June 29 and the Senate doing so the day before.

TRTA members have been waiting to learn the outcome of SB 1, to which Representative Larry Gonzales attached an amendment intended to provide financial relief to TRS annuitants. A conference committee consisting of five representatives and five senators reviewed SB 1 and its 181 amendments in the final days of the specialsession. On Monday June 27, the committee filed its official report. The Gonzales amendment was no longer included in the final version of the bill and this means that retirees will not receive a permanent or supplemental increase in their pension benefit this biennium.

The Gonzales amendment, originally written as HB 3542, would have provided the Teacher Retirement System Board of Trustees with the temporary authority to issue a supplemental payment to TRS retirees pending certain financial conditions. These conditions were meant to protect the stability of the pension fund by ensuring that a payment would be made only if TRS would remain at least 80% funded or higher. Additionally, the payment could not have been made unless TRS investment earnings for the fiscal year exceeded 8%.

TRS retirees have not received a permanent pension increase in 10 years, though a supplemental payment was issued in 2007. While that payment was greatly appreciated and helped hundreds of thousands of Texas public education retirees, the fact remains that our members’ buying power has diminished by over 30% since 2001. Larry Gonzales’ unique approach to providing financial relief to retirees would have helped hundreds of thousands of people living on fixed incomes and would not have impacted the state’s general revenue fund.

Our sincere gratitude goes to Representative Gonzales for his repeated efforts in trying to have this legislation passed. While the removal of the amendment is a disappointment, we are grateful to have his support and look forward to working with him again in future sessions.

Thank you to the thousands of TRTA members who have worked hard during both the regular and special sessions, reaching out to legislators and educating them on issues that impact all public education retirees.

If you are not a TRTA member but would like to join in our efforts to defend your TRS benefits, please contact the Texas Retired Teachers Association at 1.800.880.1650. We will be happy to answer all your membership questions.

Again, thank you for all you do to support TRTA.

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