State

After Restructuring State Employees Pension, Legislature’s 13th Check for Retired Teachers Stalled by Quorum Break

The Texas legislature is prioritizing another financial injection into the Teachers Retirement System (TRS), the state’s pension for its public-school teachers. While its fate is tenuous because of the current stalemate in the Texas House with a broken quorum, the Senate has already passed Senate Bill (SB) 7 that would provide pensioners with an additional “13th check.”

Pensioners receive monthly checks and this extra benefit would be a one-time offering estimated to cost $700 million in Fiscal Year 2022. The payment to individual recipients would be the lesser of their current monthly payment or $2,400.

Rep. Greg Bonnen (R-Friendswood) said at a Wednesday press conference, “There are 430,000 retired teachers who are counting on us to pass this legislation.”

According to Bonnen, over half of the state’s retired teachers have never seen a cost-of-living increase in their pensions and most are receiving roughly $35,000 per year from their pensions.

“As a Republican caucus, we’re looking forward to voting on a bill to provide relief to our retired teachers,” he added, further stating, “The Democrats who left the state must come back and work with us on this.”

If the measure doesn’t pass in this special session, Bonnen said pensioners may have to wait until 2023 to receive the boost to their benefits. The House’s version, House Bill 85, had already passed through the committee process but is currently stuck in the Calendars Committee awaiting floor consideration.

Tim Lee, executive director of the Texas Retired Teachers Association, told the Dallas Morning News, “We’re holding on to hope that we’ll get some relief because some of our members are in desperate need of some financial help.”

Republicans held a press conference on Wednesday, making big hay out of their meeting with retired teachers while Democrats were out-of-dodge in D.C. Those Democrats then held a Zoom meeting on Thursday with retired teachers, countering the GOP event the day before.

The TRS is the state’s largest pension fund with over 1.6 million members. It currently has $50.6 billion in unfunded liabilities — money promised to beneficiaries but not accounted for in the fund. Per member, that unfunded liability amounts to $30,074.

Compare that to the state’s Employee Retirement System (ERS) that the legislature restructured earlier this year in an attempt to place it on sounder fiscal footing — TRS has 3.5 times the unfunded liability and 4 times the membership as ERS.

ERS, however, has a higher unfunded-liability-per-member ratio.

While current members will see no change, the legislature restructured the ERS to make it a cash balance benefit plan rather than the current defined benefit plan. The former caps the total allowance a beneficiary can receive upon retirement and can either opt for a lump sum or monthly allotment once retired. The latter sets a defined cash amount to be doled out monthly in perpetuity.

Because individuals are living much longer than projected during the outset of the program, the realized costs appear exponential.

And those costs materialize in the form of those unfunded liabilities — something that has brought the entire Illinois treasury to heel. In total, its state pension systems have accumulated a $317 billion unfunded liability total despite Illinois’ economy being less than half the size of Texas’.

Illinois is a warning sign for all underwater pension systems and that kind of self-inflicted problem is a reason why the legislature initiated the ERS reform. But with the TRS, a different approach has been taken. Rather than confronting the underlying structural issues that are responsible for the ballooning unfunded liability total, the legislature has instead opted for cash injections into the system — a kind of temporary bandaid for the short term.

In addition to increasing the pension contribution levels from the state, employees, and employers, the legislature approved a one-time supplemental payment in 2019 — nearly identical to this year’s proposal.

But the fate of this year’s proposed “13th Check” is very much in limbo with the legislature at a stalemate after House Democrats fled to Washington, D.C. to break quorum.

After the Texas Senate passed SB 7 by a 22 to 0 vote, Governor Greg Abbott, who placed the issue on the special session’s agenda, criticized Democrats for obstructing its passage. “It’s unfortunate Texas Dems chose to run from their elected responsibilities and abandon the retired teachers of Texas,” he tweeted, which was echoed by the bill’s author Sen. Joan Huffman (R-Houston).

Huffman explained that the issue was not advanced in the regular session due to the tight fiscal projections caused by the government-mandated shutdowns of the pandemic.

The regular session’s proposed “13th Check” legislation had 129 coauthors in the House. It was sent to the Calendars Committee on April 22 but was never scheduled for a floor debate.

In January, the comptroller estimated a $1 billion shortfall — up from its dire $4.6 billion shortfall projection last July. But in early May, with almost a month left in session, the comptroller revised that estimate to project a $725 million surplus.

And since then, another update from the comptroller estimated a $5 billion surplus in the state’s general revenue fund.

The Senate, too, had nine members flee to D.C., but still had enough attendance for a quorum to move business.

States that have attempted to restructure their teacher pension systems often face massive political recoil. Teachers and their unions or associations are very politically active and wield their bully pulpits effectively.

In 2018, the Kentucky Statehouse was stormed by teachers from across the state protesting a pension reform bill. The bill eventually fell under its own weight when the state supreme court ruled the maneuver by which it was passed — being shoehorned into a sewer bill.

The episode illustrates the massive political wind any effort to structurally reform the TRS would face. Texas legislators have thus far been unwilling to confront that fiscal obstacle behind which the political beast lurks.

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