Author Archives: Monty Exter

TRS update: The vote is in

After taking testimony from many active and retired educators and those who advocate for them, including ATPE, the TRS board of directors deliberated today and ultimately adopted an assumed rate of return of 7.25%, down from 8% currently.

You can read more about this issue in previous Teach the Vote blog posts, including this post from yesterday. ATPE has also released this press statement following this morning’s vote.

TRS has provided this infographic to help interested parties better understand the reasons behind the move to a new rate and address some questions related to change.

One thing is certain: the ball is now firmly in the legislatur’es court to properly fund the TRS pension through increased compensation rates. Educators who are interested in the health of the fund should keep that in mind at the ballot box in November.

What’s happening at TRS this week?


This week, the TRS board of directors will discuss and likely take action on a recommendation to lower the assumed rate of return (RoR), based on investment forecasts provided by independent financial experts hired to assess all of the assumptions TRS staff uses for planning purposes. Should the board lower the assumed RoR it would be in line with broader trends in the public pension sector, including TRS’s peers. The vast majority of experts expect less robust investment returns in the near and mid-term future.

In order to maintain the long term health of the fund without decreasing pension benefits, contribution rates will need to be increased to offset an anticipated decrease in investment revenue. Unlike many local pension systems (e.g., municipal, police, and fire), the TRS board does not set contribution rates for either employees or employers; nor does the board set the benefits paid out to retirees. Both TRS contributions and benefits are completely determined by the Texas legislature. Should the legislature fail to pass a plan to provide adequate contributions over time, the only remaining options would be to reduce benefits, further weakening current and future retirees’ retirement security, or put the fund into a situation where benefits being paid out exceed revenues coming in, which would place the fund on a path to eventual insolvency.

The bottom line is that the burden is on the Texas legislature to step up and provide the necessary funding to ensure actuarial soundness of the TRS pension fund and give educators peace of mind that they will not face cuts in their pensions or other dramatic pension plan changes. Historically, the legislature has not been proactive in this area and has not prioritized funding for retired educators’ needs, opting to delay action until the pension fund reaches a crisis level.

Some educator groups have urged their members to flood TRS board members with calls and emails this week. We believe their calls to action, while well-intentioned, are misdirected, as the TRS board has virtually no authority over contributions or benefits and, with regard to investments, has a fiduciary duty to act in what it believes to be the best interest of the fund based on the prudent advice of its financial experts. In other words, TRS has few options at this time, given the legislature’s disregard over the course of decades for the growing financial needs of the pension fund.

The only way to avoid a major TRS funding shortfall that will hurt the educators who depend on the fund is legislative action, not action from TRS. With that in mind, educators who care about the short- and long-term health of TRS should be focused on the legislature, not the TRS board members. Current legislators who have not prioritized TRS funding have caused the current problem. Is it reasonable to expect those same legislators to now fix it, or does it make more since go to the polls in November and elect legislators who will prioritize TRS funding as part of a general dedication toward public education?

Check back tomorrow for a follow-up report on what action the board takes on the assumed RoR.

U.S. Supreme Court delivers major ruling affecting public employees in union states

The Supreme Court of the United States delivered a ruling today in Janus v. American Federation of State, County and Municipal Employees, Council 31 (AFSCME). The case revolved around Mark Janus, a non-union member who argued he should not have to pay “agency fees” collected by the union in his state of Illinois to cover the cost of the union’s collective bargaining activities. The court ruled 5-4 in favor of the plaintiff, Mr. Janus, in determining that forcing workers who do not wish to join a union to still have to pay fees to a union is unconstitutional.

The outcome of this case, which has been anticipated for months, affects not only Mr. Janus and other pubic sector workers, including teachers, in the state of Illinois, but also potentially impacts public sector workers in 26 other states. Those affected states, which do not include Texas, are those that do not have right-to-work laws in place and where agency fees are currently legal.

As a non-union professional association, ATPE was founded on the principles that educators should have the right to chose which organizations with which they want to associate. We believe public education is an inherently collaborative endeavor that should not be divided into management versus labor, and that all educators should have a seat at the table when it comes to collaborating with school district leaders on pay and other contract issues, regardless of organizational affiliation. These rights, which were at the heart of the Janus case, are embodied by the right-to-work laws that have long been enjoyed by Texas educators.

In response to the court’s ruling, ATPE has released the following statement.

Stay tuned to Teach the Vote for additional analysis on this, and any other rulings, likely to impact public education or public school educators.

 

Texas Pension Review Board adopts principles of retirement plan design

A subcommittee of the Texas Pension Review Board (PRB) has been working over the last several months on a set of non-binding guidelines meant to impart what the board feels are best practices with respect to retirement plan design for use by the retirement plans that are required to report to the board.

Despite some concern expressed by smaller funds over how the board’s non-mandatory recommendation on vesting periods might be made into a legal mandate by the Texas Legislature, the full PRB unanimously adopted the proposed principles, which can be found here, at its most recent meeting.

The Texas Teachers Retirement System (TRS) pension fund is one of the many funds, and certainly the largest fund, required to report to the PRB. While the design of the TRS pension fund by and large already meets the voluntary standards enumerated in the PRB’s principles document, the two areas where it does not are notable. First, the principles document calls for “contributions to retirement plans [to] be consistent with the PRB Pension Funding Guidelines.” Those guidelines call for plans to be funded at a level that would allow the plans’ unfunded liability to be amortized over less than 30 years. Second, the PRB principles say that a plan’s “retirement benefits should be protected against the erosion of the benefit’s value due to inflation.” Essentially that means plans should include built in COLAs (Cost of Living Adjustments). In both instances, that the TRS pension plan does not comply with these best practices is a function of the Legislature choosing not to fund the plan adequately.

Perhaps the Legislature and the Governor should take a note from the PRB, a body the legislature created whose chairman the Governor appoints, and fund TRS adequately to comply with the PRB’s newly adopted principles.

 

 

Runoff Spotlight – Get to know the candidates in House District 4

When it comes to public education, the Texas Legislature has incredible power to decide how our students are educated, how our schools are funded, and how our educators are treated. From per-pupil funding to student testing to teacher pay and benefits, these issues and more will be at the forefront of the 2019 legislative session, making the 2018 election cycle extremely critical. Most of the legislators who will make up the ranks of the 86th legislature next January were decided on March 6 when Texas held its primary elections, and the bulk of the rest are looking toward competitive races in November. For the residents of a few key districts, however, the decision on who will represent them next session will be made on May 22, 2018, which is the date of the primary runoff election.

ATPE is taking a closer look at some of the runoffs that will be decided in May, where the candidates squaring off against each other have identified public education as a key campaign issue. Today, we’re analyzing the Republican primary runoff for House District (HD) 4. To learn more about the candidates vying for this seat, click on the candidate’s name and you will be taken to that candidate’s full profile on Teach the Vote.

The Candidates: Keith Bell (R) vs Stuart Spitzer (R)

HD 4 covers all of Kaufman and most of Henderson counties. The incumbent Rep. Lance Gooden (R) is running for a U.S. congressional seat, creating an open seat.

Candidate Keith Bell is a business owner and rancher who has served on the Forney ISD school board for 20 years. Responding to the ATPE Candidate Survey, Bell has said enhancing school funding is his biggest priority, should he get elected. He has been endorsed by the pro-public education groups Texas Parent PAC and Texans for Public Education.

Candidate Stuart Spitzer represented HD 4 during the 84th legislative session before losing his seat to Gooden. While he did not respond to this year’s ATPE Candidate Survey, Dr. Spitzer stated in response to the 2014 ATPE candidate survey that he believes TRS is a part of the “nanny” state and called 401(k) style investment of teacher retirement dollars a “liberty issue,” adopting language  commonly used by  those who support dismantling the TRS defined benefit pension system. Spitzer has been endorsed by the Texas Home School Coalition, a pro-voucher organization, and by Empower Texans/Texans For Fiscal Responsibility, which supports limiting state spending on public education; eliminating educators’ right to use dues deduction; private school vouchers; and privatizing the management of existing public schools.

For additional information on this race or the primary runoff elections in general, contact ATPE Government Relations at government@atpe.org.

May elections – A Texas two-fer

Most everyone knows about the general election in November, and more folks are becoming aware of the importance of the March primaries, but May is also an important, albeit confusing election month. Like November, May hosts a general uniform election date. This year that election is on Saturday, May 5th. But the month of May, also hosts the separate primary runoff election date, which this year is on Tuesday, May 22nd.

In addition to municipal ballot issues, many of the school districts around the state hold their school board and school bond elections on the May 5th uniform election date. These are important elections that set the tone for the local policy decisions and funding of your community’s public schools. As a part of adopting an overall culture of voting, Texas educators should always vote during this election.

What is not on the May 5th ballot are any state or federal candidates. Those candidates* are on the May 22nd primary runoff ballot. This year’s state level runoff races include:

Governor                         D           Andrew White vs. Lupe Valdez

SBOE 12                         D          Suzanne Smith vs. Laura Malone-Miller

Senate District 17           D           Rita Lucido vs. Fran Watson

House District 4              R           Keith Bell vs. Stuart Spitzer

House District 8              R           Cody Harris vs. Thomas McNutt

House District 13            R           Jill Wolfskill vs. Ben Leman

House District 37            D           Rene Oliveira vs. Alex Dominguez

House District 45            D           Rebecca Bell-Metereau vs. Erin Zwierner

House District 46            D           Chito Vela vs. Sheryl Cole

House District 47            D           Vikki Goodwin vs. Elaina Fowler

House District 54            R           Scott Cosper vs. Brad Buckley

House District 62            R           Reggie Smith vs. Brent Lawson

House District 64            D           Mat Pruneda vs. Andrew Morris

House District 107          R           Joe Ruzicka vs. Deanna Maria Metzger

House District 109          D           Deshaundra Lockhart Jones vs. Carl Sherman

House District 121          R           Steve Allison vs. Matt Bebe

House District 133          D           Sandra Moore vs. Marty Schexnayder

*To see more about each candidate, click on the candidate’s name above.

While everyone who is registered to vote can cast a ballot in the May 5th election, you must be eligible to vote in the May 22nd runoff election. So who is eligible and qualified to vote in the runoffs? The simple answer is anyone who is registered to vote and who did not vote for the opposing party during the March primary election. Some examples:

  • If you voted in the Republican primary election in March, you are eligible to vote in the Republican runoff in May.
  • If you didn’t vote at all in the March primary, you ARE eligible to vote in either runoff election (but not both) on May 22nd.
  • If you voted in the Republican primary election in March, you would not be eligible to vote in the Democratic runoff election in May.

Regardless of who you vote for in March or May, you may vote for a candidate of any party or even independent candidates in November. Your (wise) decision to vote in a partisan primary in March/May is in no way binding on your November ballot.

If you have additional questions about voting or candidates please contact ATPE Governmental Relations or call 1-800-777-ATPE

Showdown at TRS quarterly board meeting

The TRS board met for its quarterly meeting in in Austin this week. Per the board’s new schedule all subcommittee meetings were held on Thursday, April 19, with the full board meeting today, Friday, April 20.

Thursday’s subcommittee meetings included the Benefits Committee; the Budget Committee; the Strategic Planning Committee; the Policy Committee; the Audit, Compliance and Ethics Committee; and the Investment Management Committee. Committee agendas are attached in the links above.

Perhaps most significant among the committee discussion was the recommendation of new rates and policy design for TRS-ActiveCare for the 2019/20 school year. ActiveCare is a pass-through program, meaning the amount of money coming in from the state is fixed and any additional expense to run the plan is passed through directly to ActiveCare participants. In addition to some level of recommended increase for each of the ActiveCare plans, the staff recommended that enrollment for ActiveCare-2, the traditional PPO plan, be capped to existing participants. The Benefits Committee moved to recommend the staff recommendations to the full board, which adopted those recommendations during their Friday meeting. More detail about each of the ActiveCare plans including costs can be found in tab 3 of the attached Benefits Committee Board book.

Other committee highlights included a discussion of the need for increased authorization to hire additional full time employees (FTEs). The additional FTEs would primarily be utilized to increase staffing (and decrease wait times) in the TRS call center, as well as to continue providing for the midrange staffing needs associated with TRS’s efforts to update its technology infrastructure, known as project TEAM. The new Strategic Planning Committee also held a lengthy conversation with TRS’s new director of communications. In laying out her vision, she emphasized being more proactive and less reactive in the agency’s communications.

The full board began its meeting today by taking public testimony. A number of active and retired educators were present to testify, as well as governmental relations professionals from three of the four statewide teacher groups (including ATPE) and Tim Lee, the executive director of the Texas Retired Teachers Association. By and large the testimony was focused on the board’s upcoming decision to change the expected rate of return on the pension fund later on today’s agenda, as well as personal stories of the real world consequences of changes made to the TRS-Care health insurance program. The TRS members expressed compelling arguments that the expected rate of return should not be lowered at all from the current 8 percent mark. Organizational testifiers were in agreement that lowering the rate from 8 percent to 7.25 percent was overly aggressive, and all supported a much more gradual approach to lower the rate, starting with dropping it first to 7.75 percent.

After public testimony concluded, the rate of return discussion was the first item taken up by the board. TRS executive director Brain Guthrie presented the staff position, which heavily favored a rate of 7.25 percent. At the end of that discussion, one of the board members appointed to represent TRS members moved to set the rate at 7.5 percent. The motion failed on a vote of four to four. Then one of the board members appointed from the financial sector moved to set the rate at 7.25 percent. That motion also failed on a vote of four to four. At that point the board postponed further action on the item until its July board meeting, and the board moved on to consideration of the rest of its Friday agenda.

You can watch an archive of the full Thursday committee meeting here and the full Friday board meeting, including public testimony, here.

The Rainy Day Fund roadshow makes a stop in the House Appropriations Committee

The House Appropriations Committee, similar to its counterpart in the Senate, heard a number of interim charges Wednesday. Of note for public education, and for educators in particular, was an interim charge to continue to study strategies to use the Economic Stabilization Fund (ESF), also known as the “rainy day fund,” to generate additional revenue for state obligations without compromising the fund’s intended purpose. The charge instructed lawmakers to evaluate the current methodology used to set the ESF cap.

The committee heard testimony on ESF investment history, utilization, and investment practices from the Legislative Budget Board, the state comptroller, and the Texas Taxpayers and Research Association, whose executive director helped draft the legislation that brought the ESF into existence.

Read more about Comptroller Glenn Hegar’s plan to invest ESF dollars to create new revenue stream to fund state priorities and why that revenue is needed, in this previous Teach the Vote blog post.

SBOE Receives Public Feedback on Their Long Range Plan

After completing their regular committee work, State Board members received a report on the feedback that was received from the community engagement sessions held around the state over the course of several months in late 2017 and early 2018. A total of 680 members of the public attended one of 11 sessions. More than eleven thousand Texans responded to an online survey designed to elicit additional feedback on the same topics covered at the live sessions. The topics covered during the community conversations included student engagement and empowerment; educator preparation, recruitment, and retention; equity and access; and family engagement and empowerment.

A few of the takeaways from the survey responses; of the more the 9,300 who answered the question on funding equity, only 14.1 percent of Texans found that the level of equity in school funding in Texas was good or excellent, while 54.9 percent found that it was poor. The public ranked ensuring teacher pay equity between affluent and less affluent schools and providing “leadership and advanced career opportunities for teachers who want to remain in the classroom,” as their first and second priorities in educator preparation, recruitment and retention.

View the entire discussion on the public feedback related to the Board’s Long Range Plan here.

More information on the community / public feedback, as well as, additional information about the Long Range Plan and the Long Range Plan Steering Committee can be found here.

The next, and potentially final, Long Range Planning committee will be held on May 14. After the committee concludes it will report its recommendations to the State Board which will consider, potentially edit, and ultimately adopt some of all of the report as the State Board of Education’s Long Range Plan.

Senate State Affairs Committee discusses future of TRS pension fund

The Senate State Affairs Committee met in Austin this week to discuss interim charges about the health of various state and municipal pension systems, including the Teacher Retirement System (TRS) of Texas. The committee heard invited testimony from the staff and members of the Texas Pension Review Board (PRB), as well as the heads of several pension systems, including TRS Executive Director Brian Guthrie.

Some of the more general discussion included senators, including Sen. Charles Schwertner in particular, making the case that defined benefit pension systems are somehow inherently flawed and should be scrapped and replaced with 401(k)-style defined contribution systems. This now tired pitch, whose real aim is to line the pockets of private money managers, has been soundly refuted on many fronts, particularly as it applies to TRS. First 401(k)s have proven to be not so wonderful retirement vehicles. For the average American population which relies on them for the bulk of their retirement planning, these investment vehicles have proven to be a tool that generally leads to a woefully underfunded retirement account that is highly sensitive to market volatility and has left many in bad positions with regard to their retirement security. Second, 401(k)s were never meant to stand alone. They were really meant to be a supplement to a more traditional pension system, but even as that has gone by the wayside for many, they are still intended to be on top of Social Security benefits. However, most Texas educators will not receive full Social Security benefits because neither the educator nor the state is paying into Social Security on their behalf. This leads to the final falsehood promulgated by retirement privatizers, that defined benefit pension plans simply cost too much. The truth is Texas has been getting by on the cheap for decades.

Retirement experts will tell you that you should be putting away around 25 percent of your pre-retirement income for use in retirement. Half of that amount, 12.5 percent, is normally covered by contributions to Social Security. Any reasonably good private employer will put up a match of 4 percent, or better, toward an employee’s individual retirement account, in addition to paying the required 6.25 percent employer’s share of Social Security. This means that these private employers are on the hook for a little more than a 10 percent toward their employee’s retirement. Likewise, their employees must also put the required 6.25 percent into Social Security and typically an additional 4 percent or more into their own retirement accounts to access the employer’s match. For years the state of Texas only contributed 6 percent, the constitutional minimum, into the TRS pension system. Thanks in large part to the work of ATPE the state bumped that contribution up to 6.8 percent a few sessions ago. However, at only 0.55 percent above what the state would otherwise have to pay into Social Security, Texas still contributes less than half of what the next lowest state not paying into Social Security pays towards it educators’ retirements. Most Texas teachers are themselves contributing 7.7 percent, or just 1.45 percent above what they would otherwise be paying toward Social Security, into their pension system. When you add in the 1.5 percent districts are contributing into the TRS pension plan, the total contribution comes to 16 percent. At 16 percent, contributions into TRS are substantially less than what even average employers and employees are contributing toward retirement, and despite being many educators only source of retirement income, that is only 64 percent of what experts recommend putting away. So far from being “too expensive” as some lawmakers insist, the TRS pension system has been an exceedingly good deal for the state of Texas.

This discussion is of particular importance at this moment because while TRS has been reasonably healthy for a long time and has been on track to be actuarially sound (very healthy) within the next five years, those statistics have been based on TRS’s current assumed rate of return of 8 percent. Based on the advice of the external actuarial firm with which TRS contracts, the TRS board is considering lowering that assumed rate of return. In order to maintain the positive trajectory of the fund, legislators will need to increase the contribution rate going into the fund. Per the discussion above, these increased contributions are long overdue, and had lawmakers increased them previously, the fund would be in a much better place today. Additionally, many retirees wouldn’t have gone more than a decade without a cost of living adjustment. If TRS lowers its assumed rate of return, however, the decision to increase contributions will no longer be a luxury; it will be an imperative. ATPE is advocating for this process to take place gradually over a number of years so that the increased contributions, corresponding to a gradually decreased assumed rate of return on investments, won’t be a shock the system for either the state or educators who will both share the burden of increased contributions.

Whether a gradual approach is taken or a more “one and done” approach is used, as is being advocated by TRS, the important thing is that educators stay fully engaged with their legislators, and in choosing their legislators this election year, so that the health of the pension fund is secured.