HOUSTON (September 13, 2016) – The Texas Association of Public Employee Retirement Systems today applauded the state Attorney General’s opinion in the matter of who is liable when a local retirement system is unable to meet financial obligations.
The AG’s office, in response to an inquiry by Houston Rep. James Murphy, said “In no instance does the constitution or the Legislature make the state liable for any shortfalls of a municipal retirement system regarding the system’s financial obligations under title 109. The Texas Constitution would in fact prohibit the State from assuming such liability without express authorization.” Title 109 refers to Texas statutes regarding the formation and operation of pension funds, the benefits they may pay, and beneficiaries. Among many other considerations, Title 109 provides different operating authorizations for cities of various sizes. There are 13 pension funds in the largest Texas cities governed by statute.
Max Patterson, executive director of TEXPERS, issued the following statement:
“The AG’s opinion is welcome at this time in the debate over local control, which really means exclusive city council control of a pension system. In fact, the AG’s opinion is not news in the sense that this question has been asked, and answered, in House committee sessions reaching several years back, and essentially confirms the understanding by which all the local pension fund systems already operate. Namely, that their financial matters are the responsibility of the pension fund members and their city. It has never been expected that the state would be called to act as a backstop to local pension fund problems.
“This opinion should further the public’s understanding that the 13 pension funds in statute come to the Legislature for one thing: a checks-and-balances process that ensures every local group agrees on proposals for changes to benefits or funding. The process works well as it is because any change must receive complete approval and support from a city council, its mayor, the pension fund Board of Trustees, retirees association, active members, and unions. Without such consensus, there will not likely be a path forward for legislation in Austin. The Legislature does not take sides in who is right or wrong in pension fund matters. It wants all local concerns to be equally satisfied with change proposals,” Patterson said.
“TEXPERS and its members support the 13 pension funds in statute because the current process prevents the whipsaw effects which can occur when pension fund issues become fast-moving political footballs. Contrary to normal political processes, pension funds function best when stable, long-term thinking dominates,” Patterson concluded.
The Texas Attorney General’s office opinion may be found in its entirety at https://texasattorneygeneral.gov/opinions/opinions/51paxton/op/2016/kp0112.pdf.