The Texas House Pensions Committee met yesterday in Dallas to discuss the status of the Teacher Retirement System’s (TRS) pension plan and TRS-Care. The committee reviewed the changes that occurred last session to TRS-Care and discussed the funding issues surrounding the retiree health care program, which is expected to have a shortfall in excess of $400 million during the 2019 biennium.
TRS Executive Director Brian Guthrie provided testimony about the funding needs of TRS-Care. He discussed how the program had undergone significant changes since the end of the Legislature’s Special Session. However, the changes made last session will still leave the plan in a significant funding shortfall when the Legislature reconvenes in 2019.
Guthrie informed the committee that TRS-Care would continue to require additional funding into the future as the program’s funding is based on active teacher payroll, not health care costs.
Rep. Dan Huberty (R – Houston) recounted how a previous proposal during the 2017 legislative session would have covered the pending shortfall. He also brought to the attention of the other legislators how much money the state continued to put into both TRS-Care and the TRS pension fund.
Guthrie said that the combined amount TRS will ask for in its Legislative Appropriations Request (LAR), provided that it moves the rate of return assumption to 7.5 percent, will be approximately $2 billion.
The audience reacted to Guthrie’s testimony twice with applause. One round of applause occurred when Guthrie mentioned how other states have combined the public education personnel into the state workers’ retirement plans. Another round of applause occurred when Phil Stephenson (R – Wharton) said that the state needed to do a better job funding TRS and its programs.
Guthrie’s testimony was not a reflection of a TRS position on combining Texas TRS retirees and ERS retirees; it was, though mentioned as a way that other states with smaller populations combine worker and retiree pools to have a larger purchasing pool when procuring group coverage.
As TRTA members know, Texas has a separate health care system for its state workers. Both TRS (teachers) and ERS (state workers and legislators) are large enough pools on their own to negotiate lower rates without combining the two groups.
The TRS-Care plan has twice as many covered lives as the ERS retiree health care plan. However, the ERS health care plan’s base funding for retirees is higher than TRS-Care’s. In 2017, the state funded $930 million for state retirees. Whereas, TRS-Care’s base funding is $660 million, so TRS-Care receives less funding for twice as many participants.
The funding for retired state workers allows the state ERS health care program to be offered at no cost to state employee retirees. Dependent coverage is subsidized at 50 percent.
TRTA has never suggested, and never would suggest, that retired state employees, judges, legislators or other ERS retires should see a reduction in their health care benefits. On the contrary, we believe all public workers should receive access to affordable and reasonable health care as part of their retirement security.
Tim Lee, TRTA Executive Director, testified that the benchmark for retired educator health care is the ERS health care plan.
“We know many may have an issue with calling a retired educator a retired state worker. Our view does not validate that argument as either right or wrong; however, the bottom line is that the Legislature is in absolute control over the funding levels for TRS-Care. Using teacher payroll as a basis for funding is a broken system,” Lee said. “In order to keep TRS-Care viable and solvent, we need to work with legislators on increasing the base funding for TRS-Care. If we do not raise base funding, TRS-Care will continue to have ongoing shortfalls and retirees will not be able to cover the increased costs.”
Retired educators are aware that our dedicated state employees and state retirees receive much higher health care appropriations. The biggest differentiator between TRS and ERS is that the amount of money appropriated to ERS health care is based on COST, and TRS health care funding is based on a percentage of active teacher payroll. Teacher payroll is in no way tied to health care cost increases. TRS-Care cannot be “fixed” unless the base funding is increased, or if the legislature ties TRS-Care appropriations to the cost of care like it does for ERS.
Lee’s invited testimony focused on how only by working as a team could the Legislature and stakeholders address the funding concerns for TRS-Care.
Lee reviewed how the costs for health care didn’t go away after last session but were simply paid for by increasing the financial burden on the retirees, the legislature, and the school districts.
“The rising cost of health care is a big problem. The cost of health care is the enemy, and virtually nothing is left to be done to truly reduce costs” Lee said. “Our members have taken on as much as they can afford.”
More than 100 people were in attendance for the Pensions Committee meeting. Much of the audience was comprised of TRTA members from District 10 and 11. There were even some TRTA members from Brownsville, Texas, which is 544 miles away.
A common theme among the TRTA members in attendance was a desire to work with the legislators to be a part of the solution.
One of the public commenters who provided testimony was Pat Enlow. Enlow serves as the local president for TRTA’s Carrolton-Farmers Branch Retired School Personnel Association. Enlow testified about how vital it is for the Texas Legislature to provide additional funding for the TRS pension, as the TRS Board of Trustees makes its decision on whether to lower the rate of return assumption.
The TRS Board of Trustees is expected to make a decision on changing its rate of return assumption during its July meeting, and it will likely result in lowering the rate of return assumption from its current state, 8 percent.
Statement from Tim Lee to TRTA Members:
Thank you for reading this update. If you had the chance to watch yesterday’s hearing, you may have seen how frustrating this subject matter can be for our members and for the decision makers.
We have many legislator friends who want to help us. Our communication efforts will be most effective if we encourage positive communication.
What I want to assure each of you is this, we are being made a part of the process to help improve these situations. House Pensions Chair Dan Flynn (R – Canton) and Senate State Affairs Chair Joan Huffman (R – Houston) both allowed TRTA to have a seat at the table and bring invited testimony to important committee hearings. We appreciate their interest and leadership in working on these difficult issues.
We are always going to work for you. We know many of you are struggling to afford your health care. Many elected officials are contacting TRTA and learning more about what else we can do to improve the situation. You are not forgotten, and your struggle is very real to TRTA and to the people we are working with to make this better.
The road ahead of us is long and difficult, but I know you are helping us make a difference. Thank you for your support! Your communication and membership are vital. Our strength is our member support. Please know, we will never stop working for you!