in Houston, Texas
Teacher Retirement System of Texas study suggests pension fund should be left as-is
Friday, Aug 31, 2012, 11:13AM CST
By Mark Lisheron
money

The Teacher Retirement System of Texas, a staunch supporter of its pension system just as it is, will codify that opinion with a study expected for release later today.

Don’t be at all surprised if the Employees Retirement System of Texas comes to the same conclusion when, as the Austin American-Statesman reports today,  the retirement system releases its report sometime next week.

And who called upon the two largest public employee pension systems in the state to offer up studies of themselves? Why, the state Legislature, no doubt aware there is something of a public pension crisis, reported on in detail by Texas Watchdog.

Last year, the Rhode Island Assembly, in a bid to avoid fiscal ruin, slashed benefits for 21,000 in the state’s pension plans, reducing, but not eliminating, its unfunded liability. Changes included moving employees into 401(k) plans, with the state matching employee contributions to their pensions.

By comparison, the Teacher Retirement System in Texas has roughly 835,000 members, the Employee Retirement System more than 140,000. Even critics of the pension programs and their combined unfunded liability of $28 billion aren’t suggesting they are in the same pitiful way as the systems in Rhode Island.

There is, however, considerable concern among state politicians aware that beginning with the economic downturn in 2008 the portfolios of public pension plans have performed considerably worse than expectations.

Accountants for pension plans use an 8 percent annual return as a base for calculating what employees and the state need to contribute to keep their plans healthy. Most pension plans, including those in Texas, haven’t been close to that base, hence the growing unfunded liability.

Bill King, a Houston lawyer who helped found Texans For Public Pension Reform, has called the 8 percent return “complete actuarial bullshit.”

Diverting the contributions of employees into 401(k) plans would cause the unfunded liability for the teachers fund to increase to $36 billion from its current $24 billion, Brian Guthrie, executive director of the Teacher Retirement System, told the Statesman.

Ted Melina Raab, legislative director of the Texas chapter of the American Federation of Teachers, said changing the current system would have nothing to do with fiduciary reality.

"Any move away from (a guaranteed pension) is one that is based on ideology and politics," Raab told the Statesman.

By a happy coincidence, those ideological and political legislators will be able to factor into their deliberations compensation for the directors of the pension plans.

Ann Bishop, head of the Employees Retirement System, who makes $312,000 a year, is the highest paid head of a state agency in Texas, according to a recently released study by the Texas Auditor.

Guthrie, who earns $270,000 a year, is the fourth highest paid agency head. Guthrie’s chief investment officer, however, makes $480,000 annually and his investment-fund director $330,000, the report says.

Talmadge Heflin, director of the Center for Fiscal Policy for the free-market Texas Public Policy Foundation, says, foreboding reports aside, he thinks the Legislature is prepared to make changes to put the pension plans on more sound footing.

***
Contact Mark Lisheron at 512-299-2318 or mark@texaswatchdog.org or on Twitter at @marktxwatchdog.

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Photo of money by flickr user 401(K) 2012, used via a Creative Commons license.

Comments
Kenneth D. Franks
Saturday, 09/01/2012 - 05:30AM

The Texas Teacher Retirement system should stay a defined guaranteed annuity. Politicians need to keep their hands off the funds and leave the benefits where they are. The system is sound even after the loses years ago to Enron and even the recent recession.

Sarah L. Scott
Saturday, 09/01/2012 - 03:39PM

I quite agree with Kenneth Franks' comment. Perry's appointees to the TRS Board are scary enough. The fund is solid. Leave it alone, politicians, and keep your greedy hands off. Public education has enough problems due to politicians.

Bujo Waddell
Sunday, 09/02/2012 - 10:18PM

Under the program that Gov. Perry wishes to implement, neither he or Talmadge Hefflin would be able to draw their bloated "elected official" retirements which are significantly greater than regular employees are allowed to draw.

Billie Veach
Thursday, 09/13/2012 - 12:21AM

Gov. Rick Perry and 180 other state officials "NOW" receive retirement & salary.. how can you fire yourself

then hire yourself again and receive double the money and it is a large amount.. names of the others

are not given, but Dewhurst was mentioned.. also OUR pension fund on 1/1/2012 had $113 Billion

and lost $ 3 Billion to Las Vegas Casinos when they went bankrupt, only after giving Perry a very large

donation for his failed Perry for Prez run... the eldest retirees could have used that $3 Billion since

the last increase in monthly check was in 1999..a study said the eldest retirees received 36% less

that all the other states for retired teachers.. we could use a 1/3 increase, we could even pay our bills.

Jerry whitehead
Saturday, 10/06/2012 - 12:04PM

Republican representatives have made it there main concern to try and change teacher retirement in Texas. The current system works very well with very high return rates on investments made by the system. The Republican party in control has an agenda to destroy what is a vanishing retirement system. Many corporations have made it there duty to destroy defined pensions plans in the United States. They have been very effective in accomplishing this goal. The Republican party now turns it action and efforts to destroy government defined pensions as well. It doesn't matter how well the defined programs are work, the desire is still being carried out in Texas and throughout the country. Most of these representatives are well to do financially. They don't care about the individuals or our children. All they see is the large amounts of funds that are designated for education and teachers retirement. The voters in Texas need to understand the poor self serving calibration of individuals they are electing to represent them. One can only imagine how much contribution funds they receive from providers of private education company's as well as from those in the investment sector. The representatives that are attempting this attacks will very likely gain financially by there actions, or they are already gaining from special interest groups who would love to get there hands on these funds. If these people are allowed to continue down this current destructive route our children will be hurt.

J.P. Jupe
Thursday, 10/11/2012 - 03:35PM

I prepare tax returns for a living. And by far the most outrages retirement benefits come from the public sector employees. Who have bilked future generation tax payers to unsustainable pension obligations. The simple fact is that defined benefit pension plans leaves future generarations on the hook. People should put in what they want and get out what they put in.

Ray Schulze
Tuesday, 12/04/2012 - 10:06PM

Be Thankful !!!

"Assume that a teacher retires in May 2012

at age 62. The teacher’s final average salary

at retirement is $48,182. The TRS monthly

annuity would be $2,309 as compared to

an estimated Social Security benefit of

$839. The example assumes that

approximately the same total dollar

amount is contributed to each system and

that the Social Security benefit begins at

age 62.

If this teacher were to purchase a retirement

annuity at age 62 from an insurance company

that provided the same TRS monthly

benefit of $2,309 per month for life, it could

cost over $450,000."

http://www.trs.state.tx.us/about/documents/trs_value_brochure.pdf

Brian
Friday, 02/15/2013 - 01:25PM

Ok. So after giving 20-30 years working for a nominal salary that could be doubled working in the public sector. I guess Mr. Heflin and other former and currentstate representatives feel that we as state employees have not done any thing for our state that deserves even 1/3 rd the compensation he receives for his 11 years in office as a state representative. Might as well just privatize all public works and schools. I wish we could do the same with our public officials maybe a private company could run our state better.

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