Thursday, June 13, 2019

Although some pension-related laws were passed, legislators had their focus on other issues

As expected of the 86th legislative session, public pensions were a part of the discussion. However, legislators did not scrutinize the policy area as they did during the reform efforts of Houston's and Dallas' retirement systems in 2017.

Rep. Dennis Bonnen
When the 86th Texas Legislature convened on Jan. 8, Gov. Greg Abbott and Lt. Gov. Dan Patrick returned to their respective posts. However, the House found itself needing to elect a new speaker as a result of Joe Straus’ retirement the leadership position. The House members elected Rep.Dennis Bonnen, R-Angleton, to preside over the 86th Legislative session. Speaker Bonnen exhibited his reputation as an astute and tactical House member whose experience includes critical chairmanships and as speaker pro tem under Straus.

For the 86th legislative session, the governor, lieutenant governor and speaker established public school finance and property tax reform as priorities that were not new issues to the legislature but showed the need for coordination of resources as the House and Senate collaborated on solutions. Other items also given critical focus were school safety and teacher pay.

Before the midterm elections in 2018 and the start of the 86th legislative session this year, William "Bill" Miller, co-founder of lobbying firm HillCo Partners, said he was not certain how many Democrats would win competitive House elections.

"The net result for pensions is less pressure from the conservative Republican wing to change the status quo," said Miller, whose firm represents TEXPERS.


Sen. Joan Huffman
Rep. Jim Murphy
At the start of the session, the House combined its Committee on Pensions with its Committee on Investments and Financial Services. Chaired by Rep. Jim Murphy, R-Houston, it heard pension-related legislation as well as legislation related to financial institutions and services. The Senate State Affairs committee, chaired by Sen. Joan Huffman, R-Houston, was the Senate committee with jurisdiction over pensions.

TEXPERS' Legislative Committee frequently met to discuss and analyze proposed legislation that could impact local public retirement systems. TEXPERSsupported legislation urging the U.S. Congress to eliminate government pensionoffset and the windfall elimination provision of the Social Security Act. TEXPERS officials also continued to be vocal on opposed legislation and stayed involved in discussions regarding legislation that could be impactful to all its system members. 


Two pieces of legislation passed that impact retirement systems, Senate Bill 322 and SB 2224. Representatives Huffman and Murphy co-authored both bills, which the state legislature passed. The governor signed them into law.

SB322 requires retirement systems in Texas to submit a report on investment practices to the Texas Pension Review Board, which oversees all state and local public retirement systems in Texas for actuarial soundness and compliance with state law. Huffman filed similar legislation during the 85th legislative session in 2017. Pension systems that already are currently required by law to submit such a report, as well as systems that have a book value of $30 million or less, are exempt from the bill.

During the deliberation of this legislation, TEXPERS legislative committee members worked diligently to present concerns and options to address them with the bill's authors. As a result, SB 322 was amended with language to mitigate cost, redundancy, and to allow for more accurate reporting of the information.

SB 2224 requires a retirement system in Texas to adopt a written funding policy, a measure that some local plans are already doing. The bill was discussed by TEXPERS' Legislative Committee as well as with Pension Review Board officials and found that the report was ultimately workable to systems.

Legislators proposed legislation detrimental to local defined benefit pension plans. However, bills that proposed switching defined-benefit pension plans to 401(k)-like defined-contribution plans did not move.

Also, legislators filed specific measures intended to address issues the Pension Review Board encountered during the interim. Proposals included the reporting of investment fees that were designed to address areas such as contracting of certain investment services. Other measures included adjusting the current 40-year trigger in the state's Funding Soundness Restoration Plan statute to 30 years to coincide with the Pension Review Board's funding guidelines as well as legislation requiring a report from systems on fees and commissions charged by specific consultants.

TEXPERS officials engaged legislative staff and brought to their attention various aspects of their proposed laws to help make language more workable, and many of the revisions were approved. Ultimately, these bills were left pending in committee.

In addition, legislators introduced a measure to amend the Texas Constitution to ensure that the state is not responsible for local pension liabilities. The bill passed the Senate but did not move in the House.

At the state level and as anticipated, the Texas Teachers Retirement System received funding to make the system sound and to provide a 13th check to retirees. However, the Texas Employees Retirement System was funded at status quo and remained at infinite in its funding level. The Texas Municipal Retirement System also introduced a technical clean-up bill that was approved by the legislature.


This session, the governor also reappointed Keith Brainard and Marcia Dush to the Pension Review Board. The appointments of Dush and Brainard, along with Stephanie Leibe and Rossie FariƱa-Strauss, were all confirmed by the Texas Senate. The governor also named Leibe chair the board.

During the interim, TEXPERS and HillCo will monitor and remain involved with the Pension Review Board as it continues discussions with local plans in an intensive review of a process that requires local plans to work with respective sponsoring entities given specific amortization triggers. The Pension Review Board also will implement recently passed legislation.

About the Author:
Eddie Solis is a legislative consultant with HillCo Partners, a lobbying firm based in Austin. The firm represents TEXPERS.

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