Analysis: The real big story? Shoring up the ERS pension fund

84th Legislative Session Wrap-Up

The immediate headlines from the 84th Legislature are primarily focused on social issues, but here’s a prediction: The history books will look back at this legislative session as one of the most important for state employees and retirees, as this is the session in which lawmakers prioritized and passed legislation to preserve the Employees Retirement System (ERS) pension fund. This is a tremendous achievement for the State—one many years in the making. By setting funding levels that place the fund very close to actuarial soundness, the Legislature both preserved the State’s credit rating and made an important statement of its commitment to state employees and retirees.

Lawmakers shored up the ERS pension fund, which has a $7.5 billion unfunded liability, and they did so without enacting changes to the plan’s benefits or structure or placing a burden on active state employees. A 2.5 percent across-the-board pay raise offsets the increased employee pension contribution rate.

TPEA thanks and applauds House Appropriations Committee Chair John Otto (R–Dayton) for his leadership on the ERS pension issue, along with House Pensions Committee Chair Dan Flynn (R–Van), House Appropriations Committee Vice Chair Sylvester Turner (D–Houston) and House Pensions Committee Vice Chair Roberto Alonzo (D–Dallas). Together, this bipartisan team crafted HB 9, the plan to set the ERS pension fund on a path to long-term sustainability. TPEA also thanks Senate State Affairs Committee Chair Joan Huffman (R–Houston) for sponsoring the bill in the Senate and seeing it through to passage in that chamber. We appreciate the many conversations these lawmakers had with the TPEA team as we advocated for state employees and retirees.

Key victories for state employees

  • TPEA-supported House Bill 9 shores up the ERS pension fund with increased state and employee contribution rates and without benefit design changes. By restoring the ERS pension fund to actuarial soundness, the Legislature has opened the door to future consideration of a cost-of-living adjustment or 13th check for retirees.
  • The ERS pension fund fix also includes a 2.5 percent across-the-board pay raise to offset the increased state employee contribution rate to the fund.
  • The appropriations bill includes full funding for the state’s current contribution to employee/retiree and dependent health insurance premiums, including funding ($190 million) to cover increased premiums during the 2016-2017 biennium.
  • A TPEA-provided amendment to HB 966, which creates a high-deductible health plan/Health Savings Account (HDHP/HSA) option for state employees, prevents this option from being implemented in a manner that would harm or increase the costs of the traditional Group Benefits Plan.

A few groups of state employees received targeted pay raises on top of the 2.5 percent across-the-board pay raise:

  • Texas Department of Criminal Justice (TDCJ) correctional staff and parole officers and Board of Pardons and Paroles hearing and institutional parole officers will receive an 8 percent pay raise in FY 2016.
  • TDCJ correctional managed health care (CMHC) employees will receive a 5 percent pay raise in FY 2016 and a 5 percent pay raise in FY 2017.

Although one advocacy group has attempted to take credit for the TDCJ targeted raises, the proposal was actually included in the House version of the Appropriations bill based on the proposed “Exceptional Item” made during the agency’s Legislative Appropriations Request (LAR) in September 2014. The additional pay raise for TDCJ employees is directly the result of the compelling case and documentation provided by the agency’s executive management and presented in testimony by TDCJ Executive Director Brad Livingston.

The Department of Family and Protective Services (DFPS) has been directed to provide pay raises in such forms as on-call pay and high-risk pay to certain groups of employees, but no additional appropriations were made to DFPS for this purpose, so the agency must find money to fulfill this charge within its overall budget.

The play-by-play: Reports on major bills of concern to state employees and retirees

Safeguarding the ERS pension fund: The details on HB 9

Preserving the No. 1 benefit: Fully funding health insurance and compromising on HSAs

Telecommuting and breastfeeding: Other bills of interest

What's next? A look ahead to the interim and 2016 elections