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Legislative Updates

Legislative Update No. 69, Session 80
By Tim Lee, Executive DirectorPrinter Friendly ||| Print as PDF

September 29, 2007

TRS Speaks Out
 
Pay Plans and Iran Elicit Response
 
TRTA asked the Teacher Retirement System (TRS) to provide additional communication on events happening with your pension system. TRS is quick to respond with two statements that were released on Friday, September 28, 2007. TRTA is providing these two releases for your information. A new update on TRTA legislative and pension fund concerns will soon be available.
 
 
September 28, 2007
 
RONNIE G. JUNG / TRS EXECUTIVE DIRECTOR
 
Recent Changes to TRS Investments Best Serve Members, Retirees
 
On September 26, the Austin American-Statesman published an editorial about the Teacher Retirement System of Texas (TRS) that compels both clarification and correction.
 
The Statesman editorial has given readers the impression that the TRS Board took action to pay maximum bonuses now.   In actuality, what the board did was revise the previous incentive compensation plan to potentially reward investment staff in the future only if certain criteria are accomplished, including if significant levels of excess returns are generated over the course of the next year and beyond. 
 
The Statesman has given much focus to the bonus maximums allowed by this plan, but it has not adequately informed the public that the hurdles for achievement are steep. In short, for maximums to be paid, the trust fund must earn more than $1 billion per year above the expected benchmarks. With the extra earnings, the legislature could potentially increase benefits.  
 
Many people are unaware that TRS investments have earned $53 billion over the last five years. By generating a higher return on our investments, more funds are available to pay member benefits. In fact, between 1995 and 2001 the Texas legislature granted active and retired member benefits of $16.6 billion, all of which were funded only because of TRS investment earnings. In the future, TRS members and retirees will depend more than ever on the fund’s investment income for potential benefit increases. A rapidly changing global investing environment requires that we adopt new investment strategies that will position us to significantly boost investment earnings while reducing our long-term risks.
 
Not only were the editorial’s comments on the investment compensation plan misleading, but it was equally disturbing to see that the Statesman got it wrong when it reported that a new board policy mandates secrecy.  In truth, the TRS Board has never adopted such a policy. To the contrary, TRS has always readily provided employee salary information in response to any and all open records requests, including those from the Statesman.  However, as the Statesman is fully aware, a recent court decision has forced TRS to adhere to a new standard of confidentiality in order to comply with the law.  Should it again become permissible under Texas law to release employee salaries, TRS will immediately resume its previous practice of providing this information.
 
The editorial also mentioned that the fund got into a $12 billion bind. Although the Statesman noted that the fund achieved strong investment returns over the past year, it should be further noted that as a result of these earnings and those from the past five years, the System’s unfunded liability as of August 31, 2007, will decrease significantly.
 
The bottom line is that TRS is an excellent value for both members and taxpayers. TRS delivers member benefits authorized by law in an extremely efficient manner and does an excellent job of prudently investing and managing assets held in trust for our members and beneficiaries.   
 
We hope that Statesman readers will visit our Web site (www.trs.state.tx.us) so they can read all the facts relating to these issues. We are confident that if anyone gives a more extensive and objective look at TRS board actions, it will be evident that the board has endeavored to take steps they truly believe are in the best interest of TRS members, retirees, and the trust fund itself.
 
Ronnie G. Jung is executive director of the Teacher Retirement System of Texas, the state’s largest public retirement system serving nearly 1.2 million participants.
 
 
 
Teacher Retirement System of Texas    -   1000 Red River Street    -     Austin, Texas 78701-2698    -     (800) 223-8778
Contact: Howard Goldman, Director of Communications, Teacher Retirement System of Texas, (512) 542-6508
 
 
FOR IMMEDIATE RELEASE: September 28, 2007
 
 
GOVERNOR ASKS TRS TO DIVEST OF COMPANIES
DOING BUSINESS IN IRAN
 
Statement from TRS Chairman Jarvis Hollingsworth
 
            AUSTIN – On September 25, Governor Perry issued a letter directing the Employees Retirement System of Texas (ERS) and the Teacher Retirement System of Texas (TRS) to begin the process of divesting all investments in companies that do direct business with Iran.
Governor Perry has asked ERS and TRS to take the first steps in this process by identifying companies that meet the definition of doing business with Iran and to submit their recommendations and a plan of action to the Governor’s Office within the next 30 days. He further asked that each system consider options such as identifying alternative investments, as well as considering the engagement of the offending companies and encouraging them to discontinue their relationship with Iran.
"During the next month, the TRS board will develop a plan of action, examining the legal and financial issues, identifying companies that are doing business with Iran, and assessing potential alternatives. The board will remain mindful of our fiduciary duty to our members and retirees throughout this process." 
 
 
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