In Review: 2021 Regular Legislative Session
by Ann Bishop | July 19, 2021
What a year it has been! Working through the challenges of a once-in-a-century pandemic and surviving the Legislature in the same year are heavy lifts for any agency. I am filled with incredible gratitude and admiration for the integrity, dedication and commitment you have displayed towards public service under this unprecedented circumstances.
I am writing this letter in regards to our efforts on, and off, the State Legislature. With so much misinformation out there, I felt compelled to write about several bills relating to state employees and retirees generally that impact you, your colleagues, and retirees.
SENATE BILL 321 AND HB 2
What did active state employees and retirees get during the regular session of the Legislature? After 17 years of sounding the alarm about the unfunded liability of the ERS Retirement Trust and walking away empty-handed, ERS, TPEA, and allied groups finally convinced the Legislature to do something about it. Senate Bill 321 and the funding in House Bill 2 put the ERS main fund on a path to solvency. This is excellent news for state employees and retirees. It not only keeps the trust fund from running out of money when current state employees retire, but pension fund solvency also creates an opportunity for retirees to receive a benefit enhancement (13th check) in the future.
Although other state employee groups opposed SB 321 and tried to kill the bill, TPEA strongly believed that addressing the ERS pension debt was necessary for keeping a good safe retirement plan for state employees. The pension fund debt would have grown by $1.5 billion each biennium if the Legislature did not address the pension debt. In my mind, there is little doubt and in my experience as the former executive director of ERS that the Legislature would have cut benefits, created a defined contribution plan or raised contributions to current state employees next session if the Legislature had not addressed the pension plan fund debt this year.
SB 321 creates a new retirement group (group 4) for new state employees beginning September 1, 2022. Group 4 is a defined benefit plan that pays a lifetime annuity in retirement and will have many of the same features that current state employees and retirees in groups 1-3 enjoy, but there are differences. The group 4 plan is a cash balance plan similar to Texas County and District, and Texas Municipal Retirement Systems have had in their plans for years. It is a well-vetted retirement plan. Nevertheless, the group 4 plan contains many employee and retiree plan enhancements that groups 1-3 do not have. Some of the features of the new cash balance plan for group 4 employees include a lower employee contribution (6% of pay vs. 9.5%), a five-year vesting period, the rule of 80 with no early retirement reduction in benefits, guaranteed account earnings of at least 4% annually, and with the opportunity to have up to 3% per year more in gain-share when the ERS Trust Fund has investment earnings (or "gain") of more than 4% over a five-year average. There is the possibility of annuity increases in retirement for retirees when the gain-sharing benefit is achieved. Members of the Law Enforcement and Custodial Officers Supplemental (LECOS) plan will continue to access an enhanced benefit.
TPEA will monitor the implementation of the new group 4 plan and keep you informed of the progress.
ACROSS THE BOARD PAY RAISE
While the Texas legislature did not grant across the board pay raises to all state employees, the Legislature continued their decade-old policy of giving targeted pay raises to a small, defined subset of Texas state employees and making incremental changes to the Position Classification Act.
TPEA advocated for the targeted pay raises state agencies requested in their LAR while also advocating for an across-the-board salary increase. The last across-the-board pay raise for state employees was FY 2015, when state employees received a 2% increase or a minimum of $50/ month.
As you know, the Legislature views state employee benefits and salary as a package. The more money appropriated for state employee benefits, the less money the Legislature has available for state employee salaries. As long as the pension debt loomed over the state, significant workforce issues such as an across-the-board salary increase could not be addressed. TPEA's advocacy efforts will focus on state employee pay raises now that the ERS main retirement fund debt has been addressed.
The exciting and unique features in SB 321 and HB 2 direct the Legislative Budget Board to include the ERS debt payment from now on in the base appropriations bill introduced next session. This is a game-changer. Having the debt payment in the baseline appropriation, ERS does not need to ask for an exceptional item for retirement, thus freeing up money for an across-the-board salary increase for state employees.
The following are various bills affecting state employees and retirees. Where feasible, TPEA testified in favor of these bills. Click here for a list.
13TH CHECK FOR RETIREES
The 13th checks for members of the Teachers Retirement System (TRS) have become a hot point of debate since it was put on the agenda for this special session. If you are interested, read here: https://www.tpea.org/index.php/news/tpea-blog/wheres-our-13th-checks-faq for my response to retirees.
Thank you for the opportunity to work for you and for the interests of the employees and retirees of this great state. You inspire me to come to work every day to advocate for interests of Texas State retirees and employees.