Largest public pension plans sound, Texas Comptroller Susan Combs says

Texas state Capitol

While the largest public pension plans in Texas continue to be financially stable, the underfunded Houston Municipal Employees Pension System is an example of why taxpayers need to pay closer attention to the health of a system with nearly $207 billion in assets, Comptroller Susan Combs says.

While it was difficult to determine whether she was on official business or making an exploratory appearance for a run for lieutenant governor she has not formally announced, Combs has issued a valuable primer on public pensions in Texas and the nation.

Combs pronounced the two biggest pension plans in Texas, the Employee Retirement System and Teacher Retirement System in "pretty doggone good shape," Associated Press reports today.

Statewide, pensions have a combined liability of $250 billion, meaning that all plans combine are underfunded by $43.8 billion. This 82.5 percent ratio of liabilities to assets is actually much better than in most states, Combs says.

Still, as Texas Watchdog has reported, betting on returns on investment that are not realistic has driven plans and in one case the state of Rhode Island to insolvency.

In the actuarial world, an 80 percent unfunded liability ratio is considered safe. By this standard, the Houston Police Officers Pension System and the Houston Firefighters’ Relief and Retirement Fund are healthy.

The Houston Municipal Employees Pension System has a funding ratio of 61.4 percent.

Watchdog’s review of a Pension Review Board report on 96 pension plans in the state found 63 or nearly two-thirds of them with funding ratios below the magic 80 percent actuarial threshold.

The 10 largest membership plans in Texas had a combined unfunded liability of $36 billion at the end of 2011.

Combs and her report are a little fuzzy about what is to be done about chronic underfunding of some public pension plans. She referred to herself as “agnostic” on a call by some conservatives to convert public pensions into 401(k)-like plans for public employees.

Spoken just like someone running for something.

Contact Mark Lisheron at 512-299-2318 or or on Twitter at @marktxwatchdog.

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Photo of Texas state Capitol by flickr user matt rife, used via a Creative Commons license.