This past Thursday, the House Appropriations Committee discussed a number of issues affecting Texas educators and retirees. The committee heard testimony from Brian Guthrie, executive director of the Teacher Retirement System of Texas (TRS), who discussed the TRS pension fund, TRS-ActiveCare, and TRS-Care.
Guthrie testified that, thanks to increased contributions to the TRS pension fund, the fund is in a healthy place, despite TRS’ recent move to establish a more conservative investment return assumption. For the 2022-2023 school year, state and member contributions were increased to 8% of total employee compensation this year, and employer contributions were increased to 1.8%. As part of a bill passed in 2019, TRS state, member, and employer contributions have increased year after year since the 2019-2020 school year and will continue to do so until the 2024-2025 school year.
When discussing the TRS pension fund, Guthrie specifically focused his comments on the possibility of a cost-of-living adjustment (COLA) or another 13th check for TRS retirees. Guthrie testified that the most fiscally prudent method of funding a COLA or a 13th check would be from direct investment from the state. A COLA or 13th check could be funded by using TRS’ existing funds or by increasing contribution rates to the system. Guthrie noted, however, that using existing funds would weaken the fund as a whole, and that contribution rates have already been on the rise. TRS estimated it would require a $3.6 billion upfront cost to the state in order to finance a 6% cost of living adjustment for TRS members who retired before September 2019.
Rep. Giovanni Capriglione, whose COLA bill was passed out of committee last year, suggested that TRS retirees needed a permanent COLA, not just another 13th check. Capriglione stated, “Over time, a one-month payment we made two years ago is worth less in today’s dollars if they got it today, so I just also wanted to make the comment that a one-time payment, in a way, means less and less each year.”
TRS testified that TRS-ActiveCare premiums did not go up because of special appropriations by the state, but the agency does predict a massive 17% increase in premiums for the 2024-2025 plan year without action from the state. A total of $638 million in federal stimulus dollars has been appropriated to TRS-ActiveCare this year and last year, but these were one-time payments to the system that were used to keep TRS-ActiveCare premiums constant. TRS-ActiveCare is funded through the school finance formula, not from TRS funds.
TRS-Care is paid for as a percentage of employee payroll and is a separate fund from the pension or ActiveCare. TRS testified the TRS-Care fund is healthy and that there will be no premium increases for the 2023 plan year.