TEXPERS Special Report: Texas' State and Local Pension Funds Achieve Best Five-year Measure of Financial Health in 2014-15

HOUSTON (September 30, 2015) -- The Texas Association of Public Employee Retirement Systems issued a report today showing that 93 state and local pension funds which submit data to the Texas Pension Review Board combined in 2014-2015 to achieve the best overall improvement in financial health in five years.

[This report was updated in March 2016.]

The TEXPERS assessment is based on information requests it made of the PRB for standardized year-over-year comparisons of pension funds' amortization periods, as presented in PRB Actuarial Valuation Reports for the previous five years.
 
The most substantial improvement in the 2014-15 period occurred in eight pension systems moving out of the infinite amortization period, from 15 to 7. The increase, to 17 from 13, in the number of pension funds at less than infinite and more than 40 years amortization is a function of improvement of at least four systems out of the infinite category. Another four systems from the infinite amortization moved into lower amortization periods.
 
The PRB says that amortization periods are the single “most appropriate” measure of public retirement systems’ health. It defines amortization period as “the length in time, in years, needed to pay for the unfunded actuarial accrued liability (UAAL) and reflects a system’s ability to pay its normal cost plus UAAL.”
 
TEXPERS executive director Max Patterson said: “This report is a stark contrast to those which focus on unfunded liabilities in order to produce alarming headlines. Pension fund experts will tell you that amortization trends matter more than accountants’ moment-in-time snapshots of unfunded liabilities when assessing pension fund health.
 
“The trend toward lower amortization periods across all Texas pensions, in conjunction with the TEXPERS Asset Allocation report showing excellent pension fund investment performance in the 20- and 30-year periods, should provide lawmakers with the confidence to maintain the status quo," Patterson said.
 
TEXPERS has created seven graphics to describe the PRB data at www.TEXPERS.org/Amortization-report. (the updated report is available at www.TEXPERS.org/Amortization-Report-2.)