Texas Comptroller Glenn Hegar recently called on state lawmakers to address long-term needs throughout the Lone Star State, including addressing the challenges associated with its pension systems. The most pressing needs might be for the pension system for Texas state employees, as we wrote about last year.
“If we don’t address these challenges, the price we pay might be ailing pensions affecting both our state credit rating and the financial security of our teachers and state employees,” Hegar wrote in an op-ed for The Dallas Morning News.
In his op-ed, Hegar points out that Texas’ pension system for teachers already has one of the largest shortfalls in the country—the state’s Teacher Retirement System has an unfunded liability of $50.6 billion.
Teachers are scheduled to see their contribution rates increase this year, based on a law passed in 2019. Without action from lawmakers, state workers will likely see more money come out of their paychecks to help decrease their own system’s unfunded liabilities because Texas is at the constitutional cap on state contributions (10%) to that pension plan.
Hager is right to call attention to this matter. According to an Equable Institute analysis, the Texas Employees’ Retirement System only had 48 cents on the dollar for promised retiree benefits before Covid-19 struck, and that number is expected to go down due to the pandemic. In 2020, Texas saw a a -2.35 % return on investments—according to Equable’s 2020 State of Pensions December update—the worst of any state, despite assuming a 7.32 % return.
The 87th Texas legislative session began on Jan. 12 and runs through May 31.
This article republishes selections from “Texas comptroller: Legislators face a tough budget this year. They still must invest in the long term,” an op-ed by Glenn Hegar for The Dallas Morning News on Jan. 10, 2021.