Be very cautious about making pension changes

After the Texas Legislature’s passage of House Bill 9 this year, I have been reading with great interest the discussions on governmental pension plans in this state. It is a discussion that needs to occur.

Some people have suggested a dramatic change: moving these pension plans away from the defined benefit model to make them defined contribution plans, the 401(k) model.

With more than 2 million Texans depending on these pensions for their primary income during retirement, moving too quickly and simply eliminating them for something different invites unintended consequences. It would be neither conservative nor fair to those who spent their careers believing they had a commitment to a pension for their government service.

We have to remember that as Texans, when we make a promise, we keep a promise — and this applies to governmental organizations at all levels.

Part of the income decision many make in considering governmental service is the calculation of the pension, and we can’t continue to attract outstanding and qualified Texans willing to work in government service without offering a complete package of benefits.

While there are many views on why there is a pension funding shortfall in Texas, to keep it simple it comes down to a couple of things: People are retiring earlier and living longer, and contributions from the governmental entities often feel pressure from the funding needs of other essential services.

It is often easier to “kick the can down the road” on these contributions, but we all know that will only make the problem worse. That is generally why there is still an unfunded actuarial accrued liability of about $46 billion in the five statewide plans over which the Legislature has direct oversight.

In addition, the House Pensions Committee oversees more than 300 types of local plans throughout the state.

The amount of obligations is staggering to many. And when combined with the debt accumulated by school districts through the issuance of bonds, it represents a large part of overall Texas debt.

Obviously, something needs to be done. Suggestions vary, but if we don’t make an effort we are only inviting crisis situations similar to what we have seen in other states and in the private sector.

Perhaps it’s not just a problem for us but also for our grandchildren and all future Texans.

All options should be on the table. We should continue to have the political will to make the changes that make sense while remaining true to our commitment made to those in the system.

This session we were fortunate to have a solid team on the House Pensions Committee, which I was honored to chair, as well as a strong working relationship with our Senate counterparts.

The result was a bipartisan agreement to increase the employee and employer contribution rate for the Employee Retirement System of Texas to a total of 19.5 percent. For the first time since 2002, we brought it to actuarial soundness with a 32-year amortization period.

In 2013, the Legislature brought the Teacher Retirement System of Texas to actuarial soundness by increasing the total contribution rate to 15.5 percent of payroll by 2017. That allowed this system to be fully paid for in 29.3 years, which brings both systems well within the recommended 40-year range.

This took work from many different stakeholders. That is the ultimate key to a solution: teamwork from all parties to draft the best plan possible.

We all know the debt issue must be addressed to ensure there is continued investment in Texas and we can continue to enjoy the highest bond ratings that Wall Street has assigned us.

If we continue to lead the nation in job growth and provide a sound working environment with opportunities for all, Texas will continue to be the best place for people to live, do business and raise their families.

The people covered under these pension plans are a large part of making that happen, and the benefit to all Texans will be taking care of what matters most: the jobs and long-term financial security of Texas teachers, state employees, firefighters, police and many others who take care of us every day.

I look forward to more progress in the next session to do the right thing for Texas and all Texans.

State Rep. Dan Flynn, R-Van, represents Hunt, Hopkins and Van Zandt counties in the Texas House and chairs the Pensions Committee.

This story was originally published July 29, 2015 at 5:13 PM with the headline "Be very cautious about making pension changes."