1-22-2015 Please share Moodys warns Texas to take care of pension funds AUSTIN — Texas needs to address its chronically underfunded public pensions or face rising costs that could negatively impact retirees and the state’s financial outlook in the future, according to a new report from Moody’s Investors Service. “This problem is going to continue to grow sans further action,” said Thomas Aaron, the analyst who wrote the report released Wednesday. “The plans are projected to fall further and further behind.” The Lone Star State had an adjusted net pension liability of $104.4 billion in 2013, making it the 14th-highest public pension liability in the nation, according to the Moody’s analysis. The report concludes state lawmakers must increase funding for its pension systems, lessen benefits for retirees or both to address future funding challenges and to avoid a negative impact on the state economy in the future. Moody’s, one of the “Big Three” agencies that issues bond ratings for states, does not expect to downgrade Texas’ AAA rating anytime soon. However, other states that failed to improve the health of their public pensions, including Illinois, New Jersey and a handful of others, recently had their ratings slashed for failing to act in time. “Over the last few years, we have seen pensions become a much larger variable in our rating,” Moody’s Communications Strategist David Jacobson said. “While it has not impacted the state’s rating at this time, (Texas’) pension liabilities are on the high side.” Moody’s said the unfunded liability for the Teachers Retirement System, the state’s largest public pension with more than a million members, is slated to grow by 10 percent by 2019 absent increased state funding. The problem is even more acute for the Employees Retirement System, which will see its liability double compared with 2010 numbers if lawmakers do not act. “We believe it’s very urgent,” said Employees Retirement System Director of Governmental Affairs Catherine Terrell, who said the pension that covers 230,000 current and former state employees and elected officials has not been fully funded in 19 of the last 20 years. “It’s sometimes hard to create a sense of urgency because we have a trust fund so we are able to pay benefits for many years in the future. But right now it’s on a path to run out of money by 2041.” That may seem like a long way off, but Seth Hutchinson, vice president of the Texas State Employees Union, said it has been hard on pensioners. The average monthly ERS pension check is around $1,500, he said, and has been stagnant for years. “Imagine living on a flat budget for the last 14 years,” said Hutchinson, who hopes lawmakers grant a benefits increase this year. “We recognize it’s not likely to happen this legislative session, but it is something that is desperately needed by retirees.” To make the pension financially sound, the Employees Retirement System has asked the state to increase its contribution by $538 million this biennium. Lawmakers also have filed bills to grant members of the state employees and teachers pensions cost-of-living adjustments, or COLAs. A proposed House budget released by the Legislative Budget Board last week did not include the additional funding the employees system requested, and lawmakers, who granted teachers a COLA last session, are reluctant to do the same for the employees pensions before the system is financially sound. Meanwhile, lobbyists and advocates already are clamoring to convince lawmakers why their cause should get a slice of the $14.1 billion in additional revenue lawmakers have available to work with this biennium. Transportation and education needs have some of the biggest price tags, and many legislators are eager to live up to their campaign promises to lower taxes as well. “I think pensions will get a fair hearing,” said Rep. John Otto, R-Dayton, who is on the short list to head the House Appropriations Committee this session. He said he is in favor of making the Employees Retirement System financially sound, but could not support a benefit increase until it is fully funded: “That’s kind of putting the cart before the horse.”
Posted on: Fri, 23 Jan 2015 05:10:05 +0000
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