Union: Proposed Texas pension changes break promise to public employees

Members of the Texas State Employees Union CWA Local 6186 staged a mass call-in to protest the lowering of their pension and health care benefit proposed by two bills that were recently passed out of the Texas Senate State Affairs Committee and House Pension Committee.

The two bills–CSHB 1882 and CSHB 1884–increase the age at which teachers, other public school employees, state employees, and higher education employees can retire with full benefits, substantially reduce pensions for those who retire when they reach a combination of 80 years of age and service but are younger than 62 years old, raise the employee pension contribution rate, and increase the number of years used to calculate the average final salary, which will lower most people’s pension benefit.

CSHB 1884 also establishes tiered health care benefits for retirees. Only those retirees with at least 20 years of service would get full health care premium coverage. Those with less service would pay a percentage of their premium.

The bills would provide a modest cost of living raise for retirees who have been retired for at least 20 years when and if the state’s two largest pension funds–TRS for teachers, public school employees, and public higher education employees, and ERS for state employees–are deemed to be fully funded.

The two bills also increase the state’s contribution to the two pension funds.

“A cost of living increase someday, maybe for some retirees and at least some increased state contribution now are both good, but they are not worth this bill’s extreme costs that are disproportionately at the expense of current and future employees and retirees,” said Reuben Leslie, a TSEU member. “The better way would be to invest some of the state’s budget surplus to fund a sustainable system that benefits the public and those who serve it.”

In an email to members, TSEU organizing coordinator Seth Hutchinson, urged members to phone their legislators and tell them to oppose CSHB 1882 and CSHB 1884. He also said that the key to protecting pensions, health care benefits, and improving wages is to get fellow workers who aren’t union members to join TSEU and TSEU’s political action committee, COPE.

Hutchinson said that CSHB 1882 and CSHB 1884 break a promise to employees. “Up until now, current state employees believed that they enter into an agreement with the state when hired, which is that if they committed their careers to public service that the state would ensure that they receive a decent pension when they retire,” said Hutchinson. “Both these bills change all that by restructuring active state employees’ pension funds.”

Derrick Osobase, TSEU’s political director, said that since 2001, teachers and state employees have seen their benefits erode. Teachers had their pension benefit reduced in 2007; state employees had theirs reduced in 2009. In 2011, both saw their pension contributions increase. State employee health care benefits have been reduced twice, once in 2003 and again in 2010.

CSHB 1882 and CSHB 1884 both demand more sacrifices from public employees at a time when the state has a budget surplus of $8.8 billion, a surplus that does not include an estimated $11.8 billion in the state’s Rainy Day Fund.

Furthermore, both pension funds are financially sound. Both are above the 80 percent funded threshold that actuaries use to determine the financial health of a pension plan, and both have assets sufficient to pay current benefits for decades to come.

But some right-wing groups have used the fact that the pensions aren’t 100 percent funded to declare them a danger to the state’s fiscal health. Bill King, a hedge fund operator who leads the so-called Texans for Public Pension Reform, in August 2011 told the Austin American Statesman that public pensions aren’t sustainable and that the goal of his group is to eliminate them.

Reports to the Legislature, however, found that the two pension funds are sound and sustainable, and one of the reports said that eliminating them as King proposes would cost the state more money or result in reduced benefits.

The reports also found that the state’s pension plans were a good deal for the public. They provide a secure retirement for hundreds of thousands of Texans at a modest cost–about 2 percent of the state budget for 2012 and 2013.

Nevertheless, Sen. Robert Duncan, who chairs the State Affairs Committee told the Austin American Statesman that the pension cuts were needed stave off criticism from public pension opponents. He also said that accounting changes required by the Government Accounting Standards Board (GASB) also made the pension reductions necessary.

But according to TSEU, a better way to address these challenges would be for the state to increase substantially its pension funding. ERS staff estimate that the state’s current contribution to the ERS pension is about 0.046 percent of the budget. Raising the contribution to a higher percentage that would lead toward full funding would raise the ERS pension contribution percent of budget to only 0.065 percent.

Sen. Duncan also told the Statesman that the state has under funded the pension fund over the last two decades. For much of this time, the state contributed only the 6 percent minimum required by the Texas Constitution.

TSEU members are urging lawmakers to keep their promise to public employees and provide the funds needed to make up for two decades of inadequate pension funding. “Tell your legislator that it’s unfair to cut pensions when funds are available to fund it,” said Hutchinson. “They need to keep the promise made to us when we started working for the state.”

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