I am extremely proud to represent Southeast Texas in the Texas House of Representatives, and honored to serve 26 million Texans. When you elected me to the Texas Legislature in 2010, you sent me to Austin to deal with the issues. You have an expectation of me to tell you what you need to know, not what I think you may want to hear. Since 1995, no matter what the ideology or partisanship of your state’s political leadership, the Texas Legislature has underfunded your retirement fund.
Despite investment performance above the assumed rate of eight percent, protracted underfunding has resulted in a $27 billion unfunded liability. Your retirement fund is financially sound, but it is not actuarially sound. The global financial meltdown in 2008 exposed some serious issues in our financial sector. As a result, the federal government will impose new reporting requirements.
Your retirement fund’s unfunded liability level could increase to $71 billion due to these new reporting standards. This amount may be an accounting sheet perception, but we cannot neglect it. Over the last two years, various interests have made a strong push to change your retirement plan to a defined contribution from a defined benefit. Fortunately, a study conducted by the Comptroller revealed that TRS was one of the most successful public retirement funds in the country, if not in the world, and that making such a change was unwise because it would not save any money for TRS. The results from this study strengthen my hand and that of many other legislators who chose to stand with their local public school teachers and protect their retirement.
However, because these new reporting requirements will force TRS to report a higher unfunded liability, forces that desire to change your retirement to a defined contribution will regain momentum. Therefore, in order to blunt these future attempts, ensure transparency, and secure the viability of this fund in the near term and the future, the Legislature must make prudent decisions.
Many of you have contacted me about bills in the 83rd Legislature affecting the Teacher Retirement Systems of Texas. Both the House and Senate are examining the rates at which educators contribute to TRS, benefit structures, and the age at which they can retire with full benefits.
Senate Bill 1458, by Senator Duncan, is a compromise bill agreed upon by the teacher and retired teacher advocacy groups, and passed in the Senate on May 8th by a unanimous 31-0 vote. TRS members vested prior to September 1, 2014, will maintain current retirement standards. Members not vested prior to September 1, 2014 will maintain the Rule of 80. The minimum age for unreduced retirement is adjusted from 60 to 62, to include instituting for a 5% per year annuity reduction for those choosing to retire prior to age 62.
In the bill, there will be a gradual, rather than instant rise in employee contribution rates. In 2016-17, your contribution rate will increase to 7.7 percent from the current 6.4 percent. In addition to this, state contributions to TRS will rise over the same period to 6.8 percent from 6.4 percent.
To supplement contributions from the state, the district will contribute at 1.5 percent beginning in 2014-15. This brings total state and district contributions by 2017 to 8.3 percent, while employee contributions will be 7.7 percent, an improvement in real-terms over the current 6.4% even split. Also, important to note: the legislation links employee and district contribution rates to the state rate, binding any reduction in state contributions to a corresponding reduction by both employees and districts.
Again, it is an immense honor to be your state representative. I do not feel I have the luxury to assess blame on previous legislatures or give you glowing reports about a system that needs attention. You sent me Austin to deal with serious issues that have serious consequences. After fulfilling your end of the bargain, you deserve a retirement system that is strong enough to fulfill its part of the deal. As a taxpayer, you deserve transparency and fiscal solvency. I will continue to keep a sharp eye on this bill as it heads to the House floor and the 83rd Session enters its final weeks.
Thank you for your service to our state as you prepare our next generation to sustain a prosperous and vibrant Texas.
If you have any questions, please do not hesitate to contact my offices in Austin and Woodville. Feedback from our constituents is vital to ensuring that your voice is heard as the Legislature conducts its business in Austin. Please contact my office in Woodville at (409) 283-3700, or my office in Austin at (512) 463-0490.