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Budget requirements put the Teacher Retirement System (TRS) in sticky situation: Can state contribute less than 6 percent to the pension fund?
Several months before the start of each regular legislative session, state agencies must submit a proposed budget to the Legislative Budget Board (LBB), an entity composed of legislative leaders that develops recommendations for state agency budgets.
The TRS budget request typically consists primarily of the amounts needed from the state to cover the 6 percent state contribution to the TRS pension fund, the 1 percent state contribution to TRS-Care (retiree health insurance) and other administrative needs. Six percent is the minimum amount that the state is allowed to contribute to the fund under the Texas Constitution.
In anticipation of another tight budget this year, the LBB required that all agencies submit a budget that is only 90 percent of the anticipated expenditures for the current two-year budget cycle. This requirement forced TRS to submit a budget request that includes a state contribution rate of only 5.6 percent, and NO state contribution for TRS-Care. In its “exceptional items” request included in the budget documents, TRS included the 1 percent contribution for TRS-Care and an additional contribution amount for the pension fund representing a 7.19 percent state contribution – the estimated amount that would be needed to ensure that the pension system is fully funded.
We expect to see legislative committees address the issue this fall and hope to have more information at that time as to whether the 5.6 percent contribution is being seriously considered (to reduce the contribution legally, a constitutional amendment and public vote would be necessary) or was simply a byproduct of a general effort to reduce state agency spending. TCTA would vigorously oppose any attempt to reduce state contributions to the TRS pension fund and TRS-Care.
Potential benefit reduction averted in TRS Sunset Commission meeting
The Sunset Advisory Commission met in August to consider staff recommendations relating to TRS benefits and functions. Among the recommendations was a proposal to change how teachers earn service credit. Currently, a school employee can earn a full year of credit by working 4.5 months, 90 days or a full semester; the recommendation was to move to partial service credit, so that an employee in that same situation would only earn a portion of a year’s credit.
TCTA opposed this recommendation in public testimony and in private discussions with legislators, pointing out that the proposal was a benefit reduction that would lengthen the time needed for many employees to qualify for retirement, while benefiting only a small fraction of employees. Sunset staff did not project any savings to the retirement fund for implementing this change.
One of the legislators with whom TCTA had discussed this issue, Rep. Byron Cook (R-Corsicana), made a motion to remove this recommendation from the group of proposals to be adopted by the Commission and his motion was adopted. As a result of Cook’s action, the partial-year credit proposal will not be part of the final recommendations from the Sunset Commission.
Among the proposals adopted by the Commission is a recommendation to implement local individual benefits counseling, a program that should make it much easier for school employees to receive one-on-one retirement counseling without having to travel to Austin.
The Sunset Commission proposals will be included in legislation during the 2007 session, and will be subject to amendment as they move through the legislative process.
The Classroom Teacher, Fall 2006
Archive of other TCTA Publications
THE CLASSROOM TEACHER (ISSN-0279-2494) is the official publication of the Texas Classroom Teachers Association (TCTA), providing news and opinions in the interest of education excellence. All contents are copyrighted and may not be reproduced without the publisher’s permission. The views and opinions contained in this publication are not necessarily those of the publisher. Copyright © 2006. Publication schedule is quarterly. Annual membership dues for TCTA are $110, $5 of which is allocated to a one-year subscription to THE CLASSROOM TEACHER. Subscriptions for nonmembers are available for $10 per year.
