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Legislative Updates

Legislative Update No. 78, Session 81
By Tim Lee, Executive DirectorPrinter Friendly ||| Print as PDF

April 23, 2010

TRS Board of Trustees Meeting Review

TRS Executive Director Announces Retirement Plans

During today's TRS Board of Trustees meeting, TRS Executive Director Ronnie Jung announced plans to retire from his position, effective July 1, 2011.

"Ronnie has served Texans and Texas government for 36 years, and all of us on the board are grateful that he dedicated his last 14 years to TRS," said TRS Board Chairman David Kelly in a statement released by TRS.

TRTA has been told that a search process for Jung's successor may begin as early as next month, when the TRS Trustees meet for their regularly scheduled board meeting. Jung will remain in his position as TRS Executive Director through the upcoming legislative session.

Jung has been a champion for public education employees and retirees during his time with TRS. Under his leadership, TRS Texas has grown to become one of the largest pension funds in the country and the 19th largest fund in the world. I believe his work ethic is second to none. He has defended the traditional defined benefit pension plan for TRS members and sincerely cares about the fund's long-term ability to provide benefits for all public educators. His achievements are far too vast to list in this update, but suffice it to say he will be missed as the leader of this fund.

TRTA looks forward to working with the TRS trustees as they endeavor to find the new leader for this pension fund. Above all else, we expect them to find someone who believes a traditional retirement system is the best structure for public education employees. Anything less may lead the TRS in a direction contrary to TRTA's core priority: the preservation of the traditional defined benefit pension plan for public education employees.

TRS Budget Concerns

The TRS Board of Trustees also reviewed its current and future budget plans at today's hearing. One of the issues TRTA believed to be the most challenging is the loss of approximately $29 million this biennium. The reason for this shortfall is that the 6.644% state contribution rate is not being applied for the first four months of the fiscal year.

As all TRTA members know, last legislative session a $500 supplemental payment was authorized pending a ruling by the Attorney General that its issuance was permissible under Texas statute. The Attorney General eventually ruled in November 2009 that the payment was not permissible because the Legislature phrased their request in a way the Attorney General could not answer.

It is TRTA's understanding that due to this ruling, the fully appropriated amount the Legislature set aside for the $500 supplemental payment would instead become an additional contribution to the TRS fund. There was never a discussion in the legislative process that the fund may be "shortchanged" this funding for the time it took the Attorney General to make his decision (according to state statute the Attorney General had 180-days to make the determination if the supplemental payment was permissible).

Today, though, the TRS Board was told that the 6.644% state contribution rate may only be applied to the current biennium starting January 1, 2010 and not the beginning of the fiscal year beginning September 1, 2009. TRS officials informed trustees that this may be as much as $29 million in funding that the TRS pension trust fund will not receive (including state and school district contribution amounts).

TRTA testified at the TRS Board of Trustees meeting that the state needs to be reminded of their obligation to the fund and that not counting four months of this biennium at the rate of 6.644% is not acceptable. Mr. Ronnie Jung, TRS Executive Director, reminded the trustees that there is a process to work with the state to address this concern and take the time necessary to resolve it in the best interest of the fund.

TRTA agrees with participating in the legislative process to ensure this issue is addressed; however, the fact remains that the State contribution rate for this biennium is to be 6.644%. This contribution rate was set based on the amount of money the Legislature set aside to make a $500 supplemental payment to TRS retirees. That payment was not made; therefore, the full amount set aside by the Legislature for this payment needs to be deposited into the pension trust fund this biennium. Anything less than this is a complete misrepresentation to TRS retirees.

While we are not currently launching a widespread communication effort on this issue, please know that TRTA may call on you very soon to contact your elected officials on this vital issue. We will be contacting legislators heavily about this issue and keep you updated on our progress.

Fund Values on the Rise

The TRS pension trust fund experienced one of the best quarterly earning periods in its entire history in the fourth quarter of last year. The fund's value continues to improve; its value now exceeds $98 billion.

The fund has experienced dramatic ups and downs over the last year, with a low of $67 billion in February 2009 and its current standing at $98 billion. The TRS fund managers and investment team deserve tremendous credit for their efforts to weather the storm and capitalize on the markets during this latest resurgence.

The road ahead, though, may continue to present twists and turns as everyone speculates on economic conditions around the globe. Seeing the types of double-digit investment gains TRS has enjoyed over the last six months is likely to be far more difficult, but TRS investment professionals believe they are uniquely positioned to make the most out of the circumstances ahead.

The bad news is that the fund is still not able to absorb the cost of future benefit increases and TRTA believes it will take a greater legislative commitment to the fund in order for those benefit adjustments to be made. Of course, TRTA will be advocating for a legislative plan that will help improve TRS benefits for current retirees, especially those that have gone 10-years with no cost of living increase in their pension benefit.

Other News

Early this year, the Governor, Lieutenant Governor, and Speaker of the House jointly signed a letter requiring all state agencies to reduce their budgets this biennium by 5 percent. This requirement did NOT impact TRS pension trust fund dollars, but it could impact TRS administrative budget, as well as the TRS-Care appropriation.

TRS has already made plans that, if agreed to by legislative leaders, would have a minimal impact on TRS-Care and a larger impact on the TRS administrative budget. This plan also has already benefited the TRS fund, as many of the proposed changes will save TRS money over the current biennium despite additional action by the Legislature. The bottom line is that your TRS trustees and staff are working to serve your needs and save the pension trust fund money at the same time. TRS Texas enjoys one of the highest satisfaction rates in the country while also operating at one of the lowest administrative costs per member.

Conclusion

The announcement of Mr. Jung's retirement will have long-term repercussions for years to come. TRTA is eager to be as much a part of this search process as is allowable, and we look forward to working with the trustees as they work to find the best candidate for this crucial staff position. These are difficult days for public pension plans all over the country. TRS Texas is a leader in the management and operation of such plans, and we need leaders who can rise to the task at hand. This situation must be watched closely, and it's imperative that TRTA have an active role. We will do all we can to keep you informed about these issues and the actions leaders are taking to represent your pension fund.

Your continued membership and support helps to ensure that our concerns about this issue (and the many others we face) are taken seriously by those who have the power to address them. Thank you for making TRTA as strong and influential as it is today.

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