By Kate Alexander – American-Statesman Staff – Wednesday, May 8, 2013
The financial burden of improving the financial footing of the Teacher Retirement System of Texas will be shared by the state, school districts and members under a Senate deal struck Wednesday.
Everyone will chip in a little more to shore up the $117 billion pension fund for school and university employees to quiet political rumblings that the state’s pensions are not sustainable.
“This is a very serious and I think long-term fix,” said state Sen. Robert Duncan, R-Lubbock, who chairs the State Affairs Committee and authored Senate Bill 1458. “What we’ll have is a fund that is more robust, that will be fundamentally sound.”
The combined effect of higher contributions and changes to retirement eligibility for employees with fewer than five years of service would improve the financial health of the fund enough to allow a 3 percent cost-of-living adjustment for some retirees. They last received a bump in their pension check in 2001.
The bipartisan Senate plan calls for the state to increase its contribution rate to 6.8 percent in 2014, up from the current 6.4 percent.
The members’ rate will gradually rise from 6.4 percent to 7.7 percent over the next four years.
And for the first time, school districts that do not participate in Social Security must contribute 1.5 percent toward their employees’ retirement.
The state has also found an additional $80 million to put toward retired teacher health insurance fund, which is projected to have $1.2 billion deficit come 2017.
Under an initial proposal, half of current employees would have been required to work until age 62 to receive full retirement benefits. They now have no minimum retirement age but must achieve the “Rule of 80,” in which their years of service and age equal 80, so some would have to work about a decade longer.
Duncan agreed to exempt all employees who will be vested in the retirement system as of 2014, but in turn all employees were being asked to increase their contribution from 6.4 percent to 7.7 percent in one jump.
Phasing in that increase was key to winning over the teacher groups and the Democratic support needed to get the bill to the floor.
“We’re not going to have an overnight dramatic increase. Instead, we’re going to ramp that up slowly and gradually,” said state Sen. Kirk Watson, D-Austin.
The Senate unanimously approved the bill and sent it to the House.