Pew Charitable Trusts Misleads On Texas Pension Funds

Executive Summary: Over the years, the Texas Association of Public Employees Retirement Systems has called into question the objectivity of Pew Charitable Trusts’ reports on public employee pensions. In sum, the organization has proven itself biased against defined benefit plans for police, firefighters, teachers, and state and municipal employees. Their May 2019 report, “Municipalities Grapple with Retirement System Shortfalls,” is similarly biased in our opinion and should also be viewed skeptically with regards to Texas systems. This TEXPERS Backgrounder identifies problem areas in the Pew report with regards to the Texas pensions.

2015 Data: Pew’s report uses 2015 data for the 33 cities it selected. It used aggregated data for the pension systems in Dallas and Houston for police, firefighters, and municipal employees. The extent of the investment problems for Dallas Police and Firefighters Pension Fund were just being determined in 2015, and that data possibly reflected its lowest valuation. The Texas Legislature made significant changes to the systems in both cities in 2017 legislative session. Now, in 2019, the changes have been viewed as positively enhancing those systems. We understand Pew’s reasons for selecting the 2015 data – not all the cities offered more current data – but that fails to undo the tarnish which their report did to Texas’ pensions.  

Lack of Balanced Data: If the purpose of the Pew Charitable Trusts report is to cherry pick poorly performing cities, it succeeds. But TEXPERS offers a much more comprehensive view of Texas’ pension funds using data from the state agency which monitors 99 pension systems. Our report on positive emerging trends in 2015 among all Texas pension systems is available here, while our most recent 2018 report confirming the positive 2015 trend analysis is available here.
 
Use of Questionable Measure: The Pew Report focuses its report on the funded ratio of 33 systems. A funded ratio is the percentage of assets on hand at a moment in time to fund promise obligations in the future. The funded ratio is not the best measure of pension fund health because it is unrealistic. It assumes that all working public employees would resign from their job on a single day and the pension assets on hand that day would not be enough to pay the future promised benefits to those employees. The Texas Pension Review Board, per Texas statutes, prefers using amortization periods as the primary measure of pension fund health. An amortization period is comparable to a home mortgage: it’s the number of years in the future it will take to pay off all the liabilities. The PRB prefers using the amortization period because it captures the funded ratio and the future funding effort together. 

TEXPERS will make expert resources available to discuss these or other pension fund related matters at your request. Thank you for taking a moment of interest in Texas’ pension systems for public employees.