Retired teachers who already are worried about their state pensions will be even more threatened during next year’s legislative session, unless they start doing something about it now. The same warning holds true for active school employees who , sooner or later, also will be retirees.
So, you may ask, what else is new? With low salaries, modest pensions and rising health care costs, school employees and retirees are under constant attack by most of the powers that be in Austin. True enough.
But the 2019 session, which convenes in January, may be even worse, following last week’s decision by the Teacher Retirement System Board of Trustees to lower the assumed rate of investment return on the educators’ pension fund from 8 percent to 7.25 percent. It was a technical move, required by global economic factors, to maintain the financial integrity of a very strong fund. The action didn’t lower anyone’s monthly pension payment – only the Legislature can do that — but it nevertheless will have consequences for retirees and future retirees.
The first consequence is that the Legislature will have to increase contributions to the TRS fund to make up for the anticipated losses in investment income. The Legislature also will decide who pays the higher contributions. At present, teachers and other active school employees pay 7.7 percent of their salaries to the fund, the state pays 6.8 percent of the total teacher payroll and school districts pay 1.5 percent.
Texas’ contribution rate is the lowest of any state’s contribution rate to a teacher retirement fund. Nevertheless, the current state leadership, which has a history of shortchanging public education and educators, may not want to dig any deeper into the state budget. Instead, it may choose to add millions of dollars to the contributions that active teachers, school employees and school districts have to pay.
The Legislature could even choose to lower pension payments for retirees, although I am not predicting that will happen. At present, retirees’ monthly payments average only $2,060, which are among the lowest in the country, and most retired educators in Texas don’t get Social Security.
But the current leadership, if still in power in January, may attempt something equally detrimental for retired educators and future retirees because sharks already are circling, ready to grab an advantage from the opening that TRS has given them.
These sharks are the profiteers who want to wipe out TRS, as we know it, and its defined benefit plan for retirees and replace it with a riskier (for retirees) 401k-style, defined contribution plan. Each future retiree would determine his or her own contribution and roll the dice on future economic conditions to determine the eventual benefit.
A 401k can be a nice supplemental retirement fund for those who can afford it, and if the markets cooperate. But under-paid educators deserve and need a more-stable, defined benefit plan as their retirement base, especially educators who don’t receive Social Security benefits, which include most school employees in Texas.
But the 401k sharks are circling, salivating over all the lucrative management fees that could be pocketed from a $150 billion teacher pension fund and the hard-earned contributions that educators are making to it.
Such a conversion has been discussed in recent years without gaining much traction because of opposition from TSTA and other employee groups that recognize the dangers. But no sooner had TRS lowered its assumed rate of return last week than the sharks, including privatization advocates at the Texas Public Policy Foundation, were smelling fresh blood in the water.
And when the Texas Public Policy Foundation speaks, Gov. Greg Abbott, Lt. Gov. Dan Patrick and many members of the legislative majority listen and, more often than not, obey orders.
The best defense that educators and retirees have against the pension sharks is coming up on Nov. 6, Election Day. Early voting will start Oct. 22, and if you aren’t registered to vote, that deadline is Oct. 9. Abbott, Patrick and legislative offices will be on the ballot, and so will pro-public education and pro-retiree candidates endorsed by TSTA-PAC.
Vote Education First! Vote like your profession – and your pension – depend on it. Because they do.