AUSTIN (Nexstar) — Over the weekend, Gov. Greg Abbott signed into law Senate Bill 12, which increases state contributions to the Teacher Retirement System over the next five years. The goal is to pay off debt and make the pension fund financially healthy.
“We are making a promise to our current active teachers that their retirement security will be assured with dollars in the bank to pay for those costs long into the future,” Tim Lee, executive director of the Texas Retired Teachers Association, said. “That’s important to all Texans because the taxpayer wants to know that our teachers are going to be taken care of because by and large, our teachers do not have social security. This is their retirement security, so if we’re going to make a promise to our active teachers, we want to make sure we’re going to live up to that promise.”
The bill also increases state, teacher and employer contributions to the Teacher Retirement System. Active employee members would contribute to the Texas Retirement System specific percentages of their annual compensation per year: 7.7 percent for fiscal years 2020 and 2021, 8.0 percent for fiscal years 2022 and 2023 and 8.25 for following years. The state is setting aside $1.1 billion for this fund.
“Texans are controlling the dollars,” Lee said. “We’re not needing to depend on Washington to control our investments. TRS controls our investments and they do a very good job.”
Retired educators will receive a one-time supplemental check of up to $2,000 no later than September 2020. This will apply to all eligible members who are retired as of the end of 2018.
Rosemary Morrow, president of the Austin Retired Teachers Association, worked in public education for nearly five decades. She primarily taught U.S. history and Texas history to students. She says aiming to make this pension fund financially healthy is a positive step for retirees.
“We also need to keep in mind, when we talk about TRS, it’s not just teachers,” she said. “It includes all the classified people that pay into TRS. Those are the cafeteria workers, bus drivers, custodians and others.”
Lee says if the state sticks to this plan under SB 12, the system “will be on a path to solvency” and will be able to pay off the debt in the next few decades.
“Now if they choose to not live up to the plan, then all of a sudden we’re going to find ourselves in a very difficult position that’s going to cost us a whole lot more to make up more in the loss of contributions.”
The Texas Public Policy Foundation says it’s a good thing state lawmakers are working to make sure teachers get the benefits they have been promised.
“1.5 million Texans depend on the Teacher Retirement System,” Kara Belew, senior education policy advisor for the Texas Public Policy Foundation, said. “The legislature, right before session, found out that the system was actually about $47 billion in debt.”
However, Belew says for the pension fund to remain solvent and sustainable, it will need to have a good return on its investments.
“The fund has been struggling because it assumed really high returns on investment that may or may not happen in the future,” she said. “So while Senate Bill 12 did a great thing, it put us on a better track going forward, if the investments in the fund do not have the returns that the legislature is anticipating, we’ll be right back in a situation where the fund owes a lot of money and is in a lot of debt and is unable to pay those benefits easily and where the taxpayers of the state of Texas are going to be asked to give more money or there’s going to have to be a benefit reduction.”