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28 Jul 2020
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Why the Teacher Retirement System of Texas Should Re-Evaluate Its Investment Approach

Tim Lee, TRTA’s Executive Director, will host a Facebook Live event on Thursday discussing this issue and fall virtual meetings on Thursday, July 30 at 10 a.m. The video will be available on TRTA’s Facebook page. You don’t need a Facebook account to view the video. The video will be recorded to the videos section of the Facebook page if you miss the live event.

In a recent article published in the Dallas Morning News, author Scott Burns discusses the investment practices—and their benefits and downfalls—of the Teacher Retirement System of Texas (TRS) pension fund.

Members of the Texas Retired Teachers Association (TRTA) have had serious concerns about TRS investment costs over the past few years, and Burns’ article provides a smart, researched validation for their apprehension.

According to Burns, TRS earned 5.2 percent in the fiscal year ending Aug. 31, 2019. It’s a number that appears small but exceeds the returns for other state public pension funds by a significant margin. For example, the Employees Retirement System of Texas (ERS) earned 3 percent during the same period.

Still, Burns points out, while 5.2 percent is a better fund performance than others, it falls short of TRS’ rate of return goal of 7.25 percent. Additionally, while Burns notes that TRS has a lot of talent on its investment staff, the “compensation and incentives for fund managers clocked in at a cool $1.3 billion for the year.”

Burns also points out that “more than 90 percent of the (TRS) management fees go to ‘alternative investments.’” Nearly half of the fund’s assets ($72.2 billion) in alternative investments, and TRS is projected to commit “an additional $36.9 billion to such investments in future years.” All of these figures can be found in the TRS Comprehensive Annual Financial Report (CAFR).

TRTA has always been supportive of TRS and its robust Investment Management Division but has continued to have questions and concerns about high external fees and staff bonuses for many years. Additionally, documents such as the 174-page TRS CAFR may be considered overwhelming for the average reader not accustomed to dissecting and analyzing information from complicated financial reports.

Transparency is vital to TRS improving its relationship with its members, and the Texas Sunset Advisory Commission’s staff evaluation of TRS this year pointed out that its explanation of alternative investments needs additional oversight and clarity. This clarity should include information about changes in investment practices and their overall impact on the fund.

For example, in the past, TRS had low investment costs and very good returns with mostly internal management. Beginning in 2007, TRS moved away from internal management and began using more external managers and moving more money to alternative assets with higher fees. The cost of external management has increased each year!

“The superiority of low-cost index investing suggests that a lot of money for teacher retirements is being siphoned off into the pockets of well-meaning and very well-paid investment managers,” Burns writes. “What if that money went to teachers? What would it do?”

TRS retirees live on an average monthly fixed income of $2,096. That’s just a little more than $25,000 per year. As the cost of living continues to rise for people everywhere, retirees are trying to make ends meet on an amount that is considered poverty level. Many retirees return to work, filling in their financial gaps with substitute teaching work. With the onset of the COVID-19 pandemic, this option may no longer be available to retirees, particularly those with underlying health conditions that make them more vulnerable to the virus.

Retirees also face the harsh, cold fact that raises are not given regularly, if at all, from the pension fund unless the Texas Legislature provides the means for it. In 2019, most retirees received a 13th check (which did not exceed $2,000) thanks to TRTA working with legislators to make the payment feasible. With the economy suffering as a result of the pandemic, retirees do not know when or if they will see supplemental income again.
Burns takes his query one step further and does the math for us, stating that if you divide the average yearly retiree’s income ($25,152) into the $1,305,067,683 spent on investment management, “you get 51,887 additional years of teacher retirement income.”

While that isn’t even enough to provide another year of income for all current TRS retirees—there are about 435,000 of them—it’s still a figure that stands out and matters to TRTA and should matter to TRS and the Texas Legislature.

How much, for example, could that amount help retirees struggling to pay for medical bills or costly prescriptions? It is enough to provide a one-time supplemental payment to all TRS retirees of about $3,000!

Burns asks if Texas public education retirees should be happy and proud, and answers with the same ambivalence we know many retirees feel.

Retirees are proud to have a system that has never missed a payment to one of its annuitants in its more than 80-year history. Retirees are proud to have dedicated their working lives and now their retirement years to public service.

They know that the TRS pension system provides great value and security to them and to the state. The system is worth improving, as it is the sole retirement income for most public-school employees—80 percent of whom do not receive Social Security benefits.

But retirees deserve better, and they deserve more. TRS must work with TRTA and the Texas Legislature to find a way to provide meaningful, long-term and much-needed benefit increases to retirees.

The TRS Board of Trustees should also make it a priority to re-evaluate its investment approach. History has shown that increasingly moving to alternative investments has not worked as planned. If returns had been stellar, the outlandish fees may have been justifiable. Several years of savings on these fees would have been enough to pay for a COLA for retirees.

TRTA is urging the TRS Board of Trustees to address Mr. Burns’ article and provide an explanation to members on how the agency will fix this problem. TRS is accountable not only for providing retirees with a reliable monthly income, but also for explaining its investment practices and how those choices ultimately impact its members’ bottom lines.

If you haven’t already, please be sure to sign up for the Inside Line and support our work by becoming a member or by renewing your membership.

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17 Jul 2020
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TRS Board Meets, Discusses Operations During Pandemic

The Teacher Retirement System (TRS) Board of Trustees met July 15-17. The board met virtually again due to the ongoing pandemic. During the meetings, the board discussed the pension plan, long-term facilities planning, the transition back into the office environment, and future meeting plans.

The TRS pension fund has experienced a tumultuous year due to the pandemic. In the first quarter alone, the pension fund’s value decreased by 8.3 percent, which equates to a decrease of approximately $9 billion. Retirees pension checks are secure and won’t experience any fluctuation. However, for any future potential cost-of-living increases, it will be important for the Texas Legislature to continue to invest in TRS. Last session, the Legislature increased its funding for the TRS pension plan by $1.344 billion.

Texas Retired Teachers Association (TRTA) members have expressed that the number one priority may be to protect the funding plan that was secured last session. TRTA is currently working on its legislative platform and will be going full force during the legislative session to protect and improve retiree benefits such as the pension plan and TRS-Care.

TRS Executive Director Brian Guthrie led the discussion on the long-term facilities planning. He said that TRS “wants to be working out of buildings that we own by 2025.”

In the meantime, short-term decisions still need to be considered for where to house the TRS Investment Management Division (IMD), and the lease at 816 Congress where IMD resides currently has not yet been renewed due to economic changes brought on by the Covid-19 pandemic.

Mentioning the TRS space at Lot 71, more commonly known to our members as the Indeed Tower, Guthrie said that leasing activity across downtown Austin has been impacted by the pandemic and the current economic environment.

Guthrie said the TRS staff will use the remainder of 2020 to study what exactly space is needed and how TRS is going to get there. This includes the paused work at the Mueller development, which was considered to become the new TRS headquarters. With 25 percent of employees potentially working from home long-term, the current headquarters at Red River may still be a viable, generational space solution for TRS.

The TRS board is not expected to make any decisions about long-term headquarters until December 2020.

Guthrie also discussed the schedule for TRS attending a Sunset Committee hearing to review its evaluation. He said the most likely date for this to occur would be Nov. 12-13. The Sunset review, which was released in April, is available here.

Additionally, Guthrie discussed working with TRTA to attend the fall District conferences. He said if the meetings are held virtually, then he and other staff members will be much more likely to attend. The TRTA Board of Directors voted on Tuesday to cancel all in-person meetings through Dec. 31, 2020.

The next TRS board meeting is set for Sept. 16-18 and will be held virtually too. It’s going to be a very busy fall for TRS as the next Texas legislative session approaches. TRTA will be sure to keep you updated. If you haven’t already, please be sure to sign up for the Inside Line and support our work by becoming a member or by renewing your membership.

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29 Jun 2020
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Early Voting for July 14 Primary Runoff Election Begins Today!

BE SAFE! VOTE EARLY! VOTE BY MAIL!

Now is the time to plan your voting strategy for the Primary Runoff Election! If you can, please vote by mail. If you must go to the polls, plan to vote early and try to go at a time when lines are shorter. The Texas Retired Teachers Association (TRTA) advises its members to wear a mask and use social distancing while at the polls.

Candidates

You may click here to see who is on the ballot.

Election Dates – Checklist

  • Vote by mail application received by deadline: July 2, 2020
  • Early Voting Period: June 29, 2020 – July 10, 2020
  • Ballot by Mail Return Deadlines: July 14, 2020 by 7:00 p.m.
  • Primary Runoff Election Day: July 14, 2020

Reminders

  • If you voted in one of the party Primary Elections in March, you may only vote in that party’s primary runoff election.
  • If you did not vote in the March Primary Election and you are a registered voter, you can vote in either runoff now.
  • Runoff elections typically feature lower voter turnout, meaning increased voting power for organized groups like TRTA. Use your voice and show your strength! VOTE TODAY!

Resources

TRTA is a proud partner of Texas Educators Vote, a non-partisan coalition of public education and civic organizations dedicated to creating a culture of voting for educators and students in public schools. Here is a helpful resource page for researching your vote provided by the Texas Educators Vote website.

Vote Now!

Use your voice and help educators make a positive difference at the ballot box! Please encourage your friends, family members, colleagues, and neighbors to vote, too! A handful of votes can make all the difference in a Primary Runoff election. Every vote counts!

Thank you for being a member of TRTA and supporting issues that matter to both retired and active educators by voting!

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