The Employee Retirement System (ERS) represents a commitment to State Employees as mentioned in our State Constitution and is a form of deferred compensation. A strong and secure retirement system is crucial for recruiting and retaining a competitive workforce. With historic turnover (19.3%) it is even more important than ever to strengthen our pension system. The State must uphold this promise and fully fund the pension system. Years of significant underfunding is the root cause of the current state of the fund, not mismanagement or sustainability.
The contributions to the plan have been increased (9.5% by State .5% by agency and 9.5% for employee). However, the funding has not met the Actuarily sound contribution level needed to fully fund the plan since the early 2000’s. A total funding contribution of 25.33% is now needed to bring the ERS fund to Actuary soundness. Once the unfunded liability that has accumulated due to the underfunding is dealt with the fund only requires a contribution of 14.24% to cover the normal costs. This normal cost is well under the current 19.5% contribution level.
With the recent decision by the ERS board to lower the expected rate of return from 7.5% to 7% the fund is now expected to reach depletion in 2061.
The Texas Legislature must include a much-needed increase of 5.83% in the next budget to put the ERS pension back on track to full funding. Employees have already shouldered a heavy burden with a current contribution of 9.5% of their check.
During the 86th Legislature, Senator Nelson requested an opinion from the Attorney General regarding constitutional limitations on the legislature contributing more than 10% to the fund. The AG determined that since the constitution also requires the legislature to fund the pension to actuarily soundness and gives the Governor power to declare an emergency, that if a contribution over 10% is included in the budget and is signed by the Governor that would be sufficient.
It is dire that action be taken this session. Either by an increase to the State’s contribution, a direct cash infusion, or a combination of both. Delaying adds billions to the cost and will hurt State Employees, Retiree’s and the taxpayer.