Tag Archives: trs budget

TRS board holds its fall meeting

Teacher Retirement System (TRS) of Texas Executive Director, Brian Guthrie, presented his comments to the TRS Board of Trustees virtually today, the final day of the board’s fall meeting.

Since the last board meeting, representatives form Texas’ largest public trust fund have participated in the National Council on Teacher Retirement (NCTR) annual trustee workshop and the National Association of State Retirement Administrators (NASRA) annual conference. Both events were held virtually. Later this fall TRS will attend the NCTR annual meeting.

Conferences are not the only thing at TRS that has transitioned to a virtual format. To ensure the safety of its staff, retirees, and active members nearing retirement (the last two cohorts both falling into higher risk age brackets), TRS has been closed to the public and its employees have been working on a largely remote basis. Guthrie anticipates more employees and contractors physically returning to work in October and the agency opening to the public in January 2021. Guthrie reported that TRS members have been largely complimentary or at least understanding of the service they were receiving in the virtual environment. Additionally, TRS has implemented policies, such as virtual huddles, to counter the sense of disconnection that extended exposure to a remote environment can cause.

After briefing the board on these more internal issues, Guthrie turned to updates on the agency’s recent and upcoming interactions with the legislature.

TRS staff has been submitting a number of interim documents in response to legislative committee requests for information, which has been the primary method used by committees to collect public and agency comments in lieu of holding public interim hearings this year. So far TRS has presented comments to the House Pensions, Investments, and Financial Services Committee, the House Appropriations Committee, and the House Insurance Committee, and TRS will be submitting comments soon to the Select Committee on Statewide Health Care Costs. TRS is going through the sunset review process currently, and the agency will also likely participate in a Sunset Advisory Commission hearing in October. The postponed sunset hearing had originally been scheduled for April of this year.

In addition to requests for information, TRS is preparing to submit its biannual legislative appropriations request (LAR) to the Governor’s office on September 25. In working with key legislative and gubernatorial staff, the agency was instructed to include in its base budget request the planned increase in state contribution rates passed as a part of Senate Bill 12 from 2019. This is very good news as it signals the legislature’s intent to fund the $544 million increase in state contributions into the retiree trust fund.

The LAR also covers the TRS administrative budget. At 7.8%, the increase to the agency’s administrative budget is the smallest requested increase in the past decade. Unlike most other state functions that pay for administrative budgets out of either agency fees or state general revenue (tax dollars), TRS administrative costs are covered by the pension trust fund and make up less than 0.2% of the total pension trust fund balance. TRS will seek one exceptional item, a funding request outside of the base budget. That item is to seek blanket authority to cover costs associated with implementing sunset recommendations and bills related to those recommendations next year. One of the sunset commission recommendations relates to improved customer service, and if approved, this rider could allow TRS to hire more staff to handle increased call volume and decrease its on-hold times.

Video of the full TRS meeting and related board materials can be found here. The final TRS board meeting of 2020 is scheduled for December 9-11, 2020.

Wrapping up the July TRS board meeting

The Teacher Retirement System (TRS) of Texas Board of Trustees met virtually last week on Wednesday through Friday, July 15-17, for its regular board meeting. In addition to other items, the board discussed the current financial market, TRS-Care and ActiveCare, the fiscal year 2021 budget and highlights of the preliminary legislative appropriations request, and updated considerations on TRS office space.

The official numbers for the trust fund through March 31 were presented to the board, but it was noted that those numbers are at this point significantly out of date. Staff went on to report that the market (as gauged by the S&P 500) has rebounded to approximately January 2020 levels, and they indicated that the TRS fund has tracked the market similarly. The benefit of the quick recovery of fund assets is that only a relatively small amount of assets had to be sold while prices were down to cover the cost of pension benefits paid out over that time frame. Longer recovery periods are by comparison much more detrimental to the fund because the period in which assets have to be sold at a reduced price, effectively locking in losses, is much longer.

TRS Board Presentation: S&P 500 chart

While the stock market and the TRS pension fund are relatively unscathed by the coronavirus pandemic for the moment, the state budget that relies largely on sales tax receipts and oil and gas severance taxes is in much worse shape. Due to this reality, state leaders called on all state agencies to cut their fiscal year 2021 budgets. Although the retirement system’s operational expenses are paid out of the pension fund itself and not out of the state’s general revenue, TRS still undertook the budget trimming exercise.

TRS staff presented the board with a proposed operational budget of $211 million for fiscal year (FY) 2021. This represents a 9% decrease from the FY21 target budget and a 6% decrease from the FY20 operational budget, which was $225 million. As part of the cost saving measures, TRS has instituted a hiring freeze through 2020 and a salary freeze through FY21. The agency has also cut the majority of outsourced funding going to vendors previously working on the data systems project dubbed TEAMS. The project will continue with the current number of in-house employees. TRS is also abandoning the effort to set completion dates on TEAMS benchmarks, as those dates have proven to be unrealistic and problematic.

In addition to next year’s budget, TRS staff also updated the board on the draft legislative appropriations request (LAR) the agency will present to lawmakers during the next legislative session. The agency’s request will cover fiscal years 2022 and 2023. The request will ask for specific funding to cover the state’s share of healthcare and pension costs, in addition to approval of the agency’s projected operational budget. TRS plans to ask for funding in the agency’s LAR based on the increased state contributions to pensions and retiree healthcare that legislators ordered during the last session and considering standard payroll growth assumptions for teacher salaries.

The agency’s LAR will also include a request for funding for 25 additional employees, or what are referred to as “Full-Time Equivalents” (FTEs). TRS staff had internally requested an additional 167 FTEs: 57 for the Investment Management Division (IMD) and 110 for the Benefits division. The 25 new FTEs in the agency’s LAR will go to IMD as a part of a “growing the fleet” initiative. This initiative aims to save the pension fund money by reducing outsourced costs in a greater amount than the cost of the new salaries. The Benefits division will have no new FTEs included in the upcoming LAR.

Over the last 18 months, space planning has become a constant conversation at the TRS board level as issues over the short term plans to lease space for housing the IMD staff have transitioned into a broader conversation on longer-term space needs for all staff. TRS continues to move forward with the goal of having a solution for its long-term office space needs in place by 2025. A major priority of that push is to house all TRS employees in the same location and discontinue the practice of housing the IMD staff in separate leased space.

As with everything, the current coronavirus has impacted the discussion around TRS space planning. With declining real estate prices and new potential spaces opening up in downtown Austin, the agency has paused its negotiations to renew its lease at 816 Congress so as to assess if there are better options available. Unfortunately, while the current market may present an opportunity for savings as a tenant, it is creating a more challenging environment in which to sublet the TRS space in Austin’s new Indeed Tower. The COVID-19 pandemic also has forced the agency to utilize remote working for a significant number of its staff for an extended time frame. Due to this change, TRS has revised its assumptions going forward on the percentage of staff who can work from home on a daily basis from 5% up to 25%. This change decreases TRS’s overall space requirements but also highlights a need for more collaborative space for staff who may usually work outside the office to come in and use. This also opens up the possibility that, with significant renovations, the agency’s current Red River location could house all TRS employees on a longer-term basis. Such renovations might not be any less expensive than simply relocating the agency to a new location outside of downtown Austin.

Finally, nominations for an active member seat on the TRS board of trustees are currently underway. The nomination period began June 15 and will continue through January 25, 2021. Assuming there are more than three successful nominees, an election will be held from March 15 to May 5, 2021. The top three vote-earners from that election will be reported to the governor, who will appoint the new board member from among those three candidates. ATPE members interested in running for this TRS board position can contact the ATPE Government Relations team for more information.

Access board documents and archived video of the July meeting here on the TRS website. The next TRS board meeting will be held in September.