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By Robert Elder
Austin American-Statesman
Thursday, May 17, 2007
Benefit hike for state retirees?
Pension and investment bills have a lot of moving parts and numbers, so here’s the bullet-point version of the latest news on a possible increase in benefits for retired state workers:
— State workers contribute 6 percent of pay to ERS. Senate Bill 1847 would make that 6.4 percent, costing a state worker at average salary an extra $10 to $12 a month.
— State contribution is 6.45 percent. SB 1847 would not change that.
— If SB 1847 passes, state employee unions/associations say they believe budget writers will boost the state contribution to 6.7 percent, enough to fund a one-time increase in the monthly payment to retirees. That would cost the state about $115 million.
The fuller story:
Retired state workers are a little closer — stress “little” — to receiving their first increase in benefits since 2001.
Last night, the House Pensions and Investments committee considered Robert Duncan’s Senate Bill 1847, which is crucial to the benefits hike. The panel left the bill pending.
Duncan’s bill would increase the amount state employees contribute to the Employees Retirement System to 6.4 percent of pay from the current 6 percent. At the mid-$30,000 average salary, a state employee would pay $10 to $12 extra a month.
The state contribution would remain the same, 6.45 percent.
The increased contribution from state employees doesn’t improve the financial health of the ERS enough to fund an increase in payments to retirees. Rep. Carl Isett, R-Lubbock, told the committee the bill means “we’re making progress and taking steps along the way” to a benefits hike.
For an increase in retiree pay, which would be a one-time deal, the state would have to bump up its contribution.
Andy Homer of the Texas Public Employees Association said his group has this agreement with Duncan: If the Duncan bill increasing employee contributions passes, the state budget will include a 6.7 contribution rate from the state — enough to increase benefits.
Another part of the deal: TPEA supports Duncan’s bill, only if the budget also includes an across-the-board pay raise for state workers. A pay hike would the sting out of increased contributions to the retirement system.
This deal, Homer told the P&I committee, “hasn’t been announced publicly, but members have have talked about it and essentially reached agreement on that.”
Rep. Vicki Truitt, R-Keller, the House P&I chair, told another witness, Caroline O’Connor from TSEU, “it looks like you’re going to get that 13th check.”
In the past, the ERS has increased benefits by granting an extra check in one month, or 13 in one year.
The average monthly retirement payment is about $1,700. An extra check would cost the state about $115 million.
Despite Truitt’s comment, the extra check is far from a done deal. The ERS says even if the state and employees kick in more, an extra check isn’t guaranteed. The system’s actuary has to certify that the fund has enough money to pay the increase and not slip back into a shortfall.
After the meeting, Homer said his association “doesn’t usually encourage reductions in take-home pay.” But, he added, increasing employees’ contribution “is best for the long-term health of the system,” particularly if the state contribution also rises.
The ERS serves about 133,000 active members (that’s just ERS, not the small judicial and law-enforcement retirement plans that the agency also administers) and about 68,500 retirees.