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Friday, September 30, 2016

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.)

Tuesday, September 13, 2016

TEXPERS Amplifies Attorney General Opinion on Pension Funds in Statute

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.