Restore the Employee Retirement System pension fund back to sustainability!
According to the most recent valuation report, the Employee Retirement System (ERS) pension fund currently has a $7.5 billion unfunded liability. ERS has also pointed out that a declining state employee workforce and underfunding from the Texas Legislature over the past two decades are two key factors that have resulted in this shortfall. In the last legislative session in 2013, both the state and employees shared the burden of improving the health of the pension fund through various cost increases and benefit cuts.
How we fix this problem
This problem was not created overnight and steps can be taken to eliminate the shortfall without placing unnecessary burdens on state employees who have already endured benefits cuts and low wages. To fix this problem, ERS has requested $535 million dollars to increase the state’s contribution into the pension fund to 10% and to cover the biennial funding shortfall. Providing full funding for ERS’ appropriation request will get the fund back to actuarial soundness without increasing costs or cutting benefits for current and new employees.
Oppose any cost increase or benefit cut on current or new employees
In addition to ERS’ funding request, there have been cost-saving proposals asking state employees to put more “skin in the game” by increasing the employee contribution into the fund and implementing various benefit cuts referred to as “plan design changes”. Any increase to state employees’ contribution to the fund is a pay cut. With state employee’s contribution already set to increase from its current level of 6.9% to 7.5% in 2017, any discussion of increasing employee contributions must take into account the fact that most state employees have seen their pay increase by just 3% since 2008. Meanwhile, their out-of-pocket health care costs continue to rise. See chart on reverse side for details.
State employees have already put “skin in the game”
In 2009 and 2013, state employees accepted benefit cuts and cost increases all while salaries remained low and stagnant. Currently, state employee pay is 36.7% below the rate of inflation compared to 1987 levels. In the absence of sufficient pay, a secure defined benefit pension plan has been a central component in recruiting and retaining qualified workers.
If reducing benefits and increasing costs is the go-to solution for this problem, then the pension plan will lose its ability to attract and retain potential employees to the state workforce. According to the State Auditors Office, the overall state employee turnover rate is 17.5%, its highest level since 2008. For many key state agencies, turnover rates range from 25% to 40%. If benefits are reduced and employee costs go up, the result will be even higher turnover rates.
State employees in Texas are tasked with tremendous responsibilities that impact every citizen in this state. From protecting at-risk children, to caring for the intellectually disabled, and ensuring our public safety: state employees are on the frontlines every day to meet those challenges. Adequate compensation in the form of wages and benefits are vital to attract and retain quality employees who carry out the core functions of state government. The effect of any cost increases or benefit cuts will be even higher turnover rates and lower quality state services for all Texans.
Retirees need a COLA (Cost of Living Adjustment) ASAP!
Unlike most TRS retirees, state retirees in the ERS system have received no cost-of-living increases in their monthly annuities since 2001. This has put many state retirees in the dire situation of having to choose between paying for food or paying for health care and prescriptions. The average ERS retiree receives just $1,579 per month in return for their years of dedication to public service. In order for the 91,000 state agency retirees in ERS to receive a COLA, the fund must be 100% actuarially sound. TSEU supports full state funding for ERS so that retirees can receive a desperately needed increase in their pensions.
Get to know our state employee pension plan
Click image to download pdf of this 6-page informational brochure. It contains what you need to know about our State Employee pensions including:
* Explanations of our plan (ERS and TRS are defined benefit plans)
* Defined Benefit vs Defined Contribution
* Several graphs and charts detailing the situation
* A snapshot of the ERS and TRS pension plans