TEXPERS Legislative Update
5 Things You Need to Know About Pension Legislation
The State Affairs committee of the Texas Senate held a public hearing Monday, March 20, and discussed five pension bills.
Here's a recap:
1. Politics vs. Voter ApprovalSenate Bill 151 authored by Sen. Paul Bettencourt, R-Dist. 7, is seeking to require funds to obtain voter approval before issuing pension obligation bonds. Some fear the bill would politicize pensions.
A representative with the Houston Police Officers Union testified before the committee and said if the pension obligation bonds were to be presented to voters and fail to gain support, it would be because of politics. The committee's chair, Joan Huffman, R-District 17, however, said she believes voters would support bonds if a case were made. TEXPERS confirmed its opposition to the bill.
The bill was voted out of committee and moves to the full Senate.
2. Unfunded Reporting Requirement
Senate Bill 509, authored by Huffman, would add a new reporting requirement for public pensions. The State Affairs committee chairwoman told the committee that she authored the bill in light of pension fund problems in Dallas as a means of increasing transparency in asset reporting.
The bill would require municipal, police and fire pension funds greater than or equal to $100 million to submit an evaluation of investments and performance every three years. Funds with $30 to $100 million would present a report every six years. Funds under $30 million would be exempt from the reporting requirement.
TEXPERS' executive director, Max Patterson, and board president, Paul Brown, testified against the bill during the hearing. Patterson said funds already provide reports to the state's Pension Review Board and the board can always request the information without establishing legislation. Brown said the legislation is an unfunded mandate and reiterated that some systems already provide the information to the PRB.
Anu Anumeha, executive director of the PRB, said the bill would require funds to obtain someone outside her state agency to check assets to ensure they are accurate. The bill was voted out of the committee.
3. Another Pension Systems Study
The state affairs committee also held a public hearing regarding Senate Bill 936, which seeks to establish a joint interim committee to study the public retirement systems in Texas.
The bill's author, Huffman, told the committee that people think she is trying to achieve a particular result, such as convert defined benefit plans to defined contribution plans, in establishing the committee but that isn't the intent. Huffman said the intent is to study the pension systems to save them.
However, Huffman did state that possible conversion from DB to DC would be considered by the interim committee as an option. The bill is supported by the Texas Public Policy Foundation, a partisan think tank based in Austin. The foundation supports the bill stating that it will restore local control. However, the Texas Retired Teachers Association conducted a study in 2011 and found that when comparing DC plans to DB plans, DB plans cost significantly less to operate.
4. To POB or Not to POB and Other Questions
Senate Bill 2190, also by Huffman, proposes changes to three pension funds in Houston. The state affairs committee discussed the bill that is based on negotiations between the city of Houston and the municipal, police and fire funds.
Houston Mayor Sylvester Turner spoke to the committee about negotiations and said the city wants to honor the defined contributions of current employees and said any shifting of new employees to defined contribution plans wouldn't reduce the city's unfunded liabilities. The bill received some criticisms from representatives of the Houston Firefighters' Relief and Retirement Fund who said the negotiated bill has new items it never agreed to, such as parity in pensions without equality in pay.
The Huffman bill also includes the use of pension obligation bonds to help raise funds to pay for the city's financial shortfall. The POB, according to the bill, would require voter approval, however. A representative from the city's municipal employee pension fund said the system cannot support the bill with the voter approval provision.
Also, the firefighter's fund would be the only fund not receiving money from any approved pension obligation bonds, according to a representative of the Houston Professional Firefighters Association who testified to the committee. The association opposes the bill as it is currently written.
During the hearing, a committee member asked Robert May, a member of the Pension Review Board and a professional actuary, if the pension reforms proposed could still work without the bonds. He said it would, however, the city's contribution rate would increase by 10 percent of payroll.
Also, while discussing the negotiation process, Mayor Turner said all but one fund provided actuarial information. David Keller Jr., chair of the Houston Firefighter's Relief and Retirement Fund, said his fund cannot release actuarial reports while in litigation and under a judge's order not to share the information. Huffman requested the fund produce the report no later than March 21.
The bill was voted out of committee.
5. Huffman: No State Funds
Senate Joint Resolution 43 was discussed during the state affairs public hearing. The bill, by Huffman, is a proposed constitutional amendment that would prohibit the use of state funds to pay for the obligations of local public retirement system.
Huffman told the committee that the state is not obligated to pay local pension debt. The bill was not voted out of committee.