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Tuesday, May 28, 2013

Texas Legislature Passes, Governor Signs Pension Transparency and Education Law

Back in December we informed our readers about Texas Comptroller Susan Combs wanting to introduce legislation to make pensions more transparent to the general public. Well, her effort has now become law after Governor Rick Perry signed HB 13 / SB 13 last Friday.

Whenever a major piece of legislation makes it through the process it’s always good to look back at why and how the process worked. Positive experiences deserve close attentions. Here’s our take on what happened.

First, TEXPERS appreciated the opportunity to participate in the bill’s formation from the outset, which was in early December 2012 when Ms. Combs held a press conference to introduce her desire to make Texas government, in general, more transparent. We obviously are in favor of transparency, and there was nothing of immense concern to us in Ms. Combs’ effort. However, we did want the public to know that there should be no inference that Ms. Combs’ was reacting to a total lack of transparency. Local and state pensions already provide the public with plenty of transparency into their operations, their investment returns, their benefits paid at every stage of their processes. We provided several newspapers with an op-ed that provided our view on all the transparency measures already in place, and you can read the op-ed in full at the Austin American Statesman, the San Antonio Express News and the San Antonio Business Journal. Ms. Combs wanted more pensions to use websites to engage in more discussions with their taxpaying constituents.

Second, our members are similarly concerned about the public’s perception of their pension operations. They want legislators and their local elected officials to feel comfortable with how they run their system. In December, we informed our 75+ members about Ms. Combs pending legislation and received very little feedback of concerns. In February, our members took a closer look at the actual legislation when Ms. Combs held a press conference to introduce her bill, named Senate Bill 13 and House Bill 13, through pension committee leaders Senator Robert Duncan and Representative Bill Callegari. We’d had time to see what was coming down and when it finally made its way to the legislature no one was surprised or taken aback by the bills’ contents.

Third, because of the long-lead times, we were able to discuss the legislation with our members with great focus in March and April. We provided the legislators with our input and tweaks along the way, both on behalf of our members and TEXPERS itself. That was because the bills were not solely about transparency. HB 13 / SB 13 also included some directives to the Pension Review Board requiring them to establish some training and education requirements of pension trustees. Of course, TEXPERS has long been the resource which pension trustees use to gain their education. Our Certified Trustee Training program has provided untold numbers of Trustees and pension administrators with education and training over the last 25 years. We’re glad Texas legislators have seen what we’ve known for a long time, that operating a pension is a very complex undertaking that requires tremendous care and concern. Our members have already been endeavoring to keep themselves up to date on the best possible opportunities for investments, and the best practices for managing and administering benefits.

In sum, by the time the bill was voted into law in May we, as a representative of Texas’s local pensions, had been included from the outset and participated in refinements along the way. It was a very positive experience for everyone involved. The process stood in stark contrast to previous years when sweeping statewide pension changes were considered. The success of HB 13 / SB 13 should be viewed as a model for introducing and shepherding any future legislation regarding pensions. – Max Patterson

Wednesday, May 8, 2013

Who Really Wants 401(k)s for Public Employees?

On May 1, future public employees of Florida dodged a bullet, and future residents of the state were given some guarantee of receiving the productive labor of motivated employees. Here’s what happened.

Florida senators voted 22-18 to pull a compromise amendment that would have shut future employees out of the state’s defined benefit plan and enrolled them in a 401(k). Eight Republicans joined all the Democrats to pull the bill from the floor.

As we’ve noted here many times before, public sector employees work for the benefits, not the salary, which are usually very low when compared to private sector employees. That is a significant budget consideration for state and local governments. They would not be able to afford comparable salaries that would retain their trained, experienced employees. Here’s what one Republican Senator said:
"One of the reasons they work for government is not for the salary," said Sen. Jack Latvala, R-Clearwater. "They haven't had raises in six or seven years. It's for the pension and if we want to continue to have the quality of employees that we have, we need to continue to offer that pension."
In essence, the Florida Senate took a very conservative position, preserving the status quo and failing to thrust future workers into the great unknown of 401(k)s.

So why are we paying attention to what happens in Florida?

Well, here in Texas there are many policy groups who are advocating a similar radical policy shift, from defined benefit to defined contribution plans. Thankfully our elected leaders aren’t listening to their mutual fund industry-backed proposals.

We noted in a previous blog how our Texas Comptroller Susan Combs told the media that there aren’t really any big problems at state and local pensions, and how decisions about the types of pensions a city uses are best left to local levels. Here’s what she said:
“Plan design is so individual. You may be able to have a great defined benefit plan depending on what’s going on. We’re agnostic on that [assertion that defined contribution plans should be employed instead]. We simply say ‘Know what you’ve got.’”
It’s evident to us that – because there was no bill advocating the dismantlement of defined benefit plans in this legislative session – most Texas lawmakers are taking the conservative approach advocated by Ms. Combs. Leaving things well enough alone is a good policy prescription. Republican and Democrat legislators see the wisdom of that in Florida. We’re glad they see that in Texas as well. – Max Patterson