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Paul Brown Testifies at House Pensions Committee Hearing March 30

Every 3-4 months the Texas Pension Review Board publishes raw data submitted by 93 state and local pension funds.
We at the Texas Association of Public Employee Retirement Systems watch these reports closely and we wanted to relay some very positive trends we are seeing
Hon. Dan Flynn
Chair Pensions Committee
 
Good morning Chairman Flynn and members of the House Pensions Committee:

I am Paul Brown, president of the Texas Association of Public Employee Retirement Systems. We have 80+ members comprised of local firefighter, police and municipal employee pension funds around the state.

Every 3-4 months the Texas Pension Review Board publishes raw data submitted by 93 state and local pension funds.

We at the Texas Association of Public Employee Retirement Systems watch these reports closely and we wanted to relay some very positive trends we are seeing.

The first thing you should remember is that the PRB has advised lawmakers that a calculation called the “Amortization Period” is the most clear indicator of pension fund health.

The AM period is a complex measure that estimates the number of years it would take to completely pay all current and future pension obligations.

Essentially it combines all the various factors that impact pension funds, including contribution rates from employees and sponsors, workforce demographics and investment assumptions.

The most important consideration is the trend: Are the pension funds steadily decreasing the number of years for their amortization period?

After close review of the PRB's data for the last six years, there is clear evidence that Texas' state and local pension funds, when considered as a whole, are making considerable progress toward improving their amortization periods.  

We are providing as part of our testimony a one-page summary of the data, but a few observations bear mentioning:

 1)      Taken as a whole, the 93 state and local pension funds showed the best overall six-year improvement to their amortization periods in the latest PRB report.

2)      37 pension funds now have amortization periods below 25 years, which is the PRB's recommended range. This is the most pension funds in that range in the last six years.

3)      Only 5 pension funds are in a worrisome category with an infinite amortization period. Even this number reflects improvement as it is a significant decrease from the high of 15 in 2014 and it is the lowest number in six years.

These trends demonstrate that Texas' state and local pension funds are working hard with their plan sponsors and workforces to set contributions and benefits at sustainable levels. They are having success with their investments. And they are successfully managing very complex pension fund dynamics.

We bring this positive trend data to your attention because we are very concerned about how other organizations are portraying the health of Texas state and local pension funds in newspaper op-eds and the special reports they produce for lawmakers.

Without naming the organizations and going into specific instances, these groups are trading on the reputation of the PRB's Actuarial Valuation Reports to give validity to questionable analysis.

The important amortization period trends are positive in Texas.

And the large differences in the size of state and local pension funds should always require us to dig deep into misleading headline numbers.

Defined benefit plans are still the right instrument for state and local public employees.

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