Senate Finance Committee Meets to Discuss TRS Funding

The Senate Finance Committee met at the Capitol building in Austin yesterday to consider the current status and funding needs of several state agencies and programs for the next biennium.

The committee heard invited testimony from the Legislative Budget Board (LBB), which provided presentations about major cost drivers for the state budget. The Teacher Retirement System of Texas (TRS), one of the state’s largest agencies, was included in this presentation. The LBB discussed not only funding for the TRS pension fund, but also the TRS-Care retiree health insurance program.

When the LBB informed the Senate Finance Committee of the impending $1 billion TRS-Care budget shortfall, an audible gasp was heard from among the committee members.

The not-so-secret funding crisis has been looming for years and can no longer be avoided. If nothing is done during the coming legislative session to resolve this funding issue, TRS-Care participants could see astronomical premium increases as high as 130 percent! TRS retirees live on stagnant incomes, with only one permanent increase in their pensions since 2001 (which did not apply to all 300,000+ annuitants).

In their appropriations request made earlier this year to the LBB, TRS asked for a supplemental appropriation of nearly $900,000,000. This is in addition to the 1 percent of active teacher payroll that is commonly provided to TRS-Care during each fiscal year, which was also requested.

Patti Featherston of the LBB testified that the pension fund is healthy. Finance Committee member Senator Joan Huffman pointed out the fund is actuarially sound according to state law. TRS has a funding period of 28 years. Prior to the passage of Senate Bill 1458 in 2013, the funding period was never. TRS has 1.4 million members, which includes active and retired educators. In 2013, they paid out $8.1 billion in annuity payments to retirees.

Featherston’s comments about TRS-Care and its projected shortfall prompted some Senators to express concern. Senator Judith Zaffirini said retirees in her area are worried about TRS-Care funding depletion, and asked Featherston what options aside from an infusion of funds are being considered to address its solvency.

Featherston stated the LBB is reviewing several potential options, as is TRS, which is in the process of finalizing a sustainability study about the program. The study is slated for release in October.

We reviewed several of the options that we being considered by TRS over the summer. Please see the links below to read our reviews of each option.

Senator Robert Nichols said most school districts don’t pay into Social Security, leaving many retirees who live on their TRS annuity alone in a “pretty tough” position. Senator Charles Schwertner requested additional information about what factors are driving up the cost of the health care program after hearing from the LBB that the medical cost trend is 7 percent.

Though TRTA was not able to testify in yesterday’s hearing, several local area members of TRTA attended to show their support for the organization and their fellow retirees.

While no decisions were made in the meeting, it served as one of the first steps our legislators are taking in determining how to handle the TRS-Care funding crisis.

Though session is still several months away, we must begin contacting our Representatives and Senators NOW and telling them how vital TRS-Care is to us! To learn more about contacting your legislators, click here.

Thank You!

Thank you for being a member of TRTA! If you are not a member of TRTA and want more information about joining, please contact us at 1.800.880.1650. Follow us on Facebook! Visit our YouTube channel for regular video updates!

TRS-Care Sustainability Study: TRTA Review, Summer 2014
Read more about Option 1: Pre-funding the long-term liability.
Read more about Option 2: Funding on a pay-as-you-go basis
Read more about Option 3: Funding for 10-year solvency
Read more about Option 4: Retirees pay full cost of optional coverage
Read more about Option 5: Mandatory participation in the Medicare Advantage and Medicare Part D plans
Read the follow-up to Option 5
Read more about Option 6: Defined contribution–Establish a Health Reimbursement Account (HRA) for non-Medicare retirees
Read more about Options 7, 8 and 9

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