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There’s one reason Texas teachers would turn down millions for health care

By   /   April 4, 2013  /   10 Comments

By Jon Cassidy | Watchdog.org

HOUSTON — A group of freshman lawmakers is trying to scrape together a few million dollars for the grossly underfunded health care plan for retired teachers.

WHEN?: TRS admits it's in a crisis and is confident lawmakers will act "when the time is right."

WHEN?: TRS admits it’s in a crisis and is confident lawmakers will act “when the time is right.”

But in a twist reported by The Texas Tribune, the Texas Retired Teachers Association is snubbing the 11 Republican freshmen, instead endorsing two other amendments and advising lawmakers to follow their leadership.

The association acknowledges “that TRS-Care is facing a future funding crisis,” but expresses confidence that lawmakers will address the issue “when the time is right.”

Apparently, the teachers’ association would rather not draw attention to a massive financial problem that both parties have been happy to ignore. The teachers’ position may seem counter-intuitive, but they know they’ll get their money. Their problem is that once voters realize just how much that is, their benefits will end up getting cut.

Like almost every state, Texas has ignored its mounting debts for retiree health care, choosing to fund costs as they occur instead of setting aside money for the benefits as they are earned. The most recent study by the Pew Center on the States estimates Texas’ debt for retiree health care at $56 billion, almost entirely unfunded. And that’s for benefits already earned, not the benefits that current employees will earn from now till they retire.

The group of 11 lawmakers has introduced 37 amendments to the budget, which were expected to be debated and voted on Thursday. All of them aim to increase funding for TRS-Care, the health care fund for retired teachers, by trimming the budget in other areas, such as obscure boards and commissions and other line items unlikely to provoke much of a fuss.

Despite the Retired Teachers Association’s views on the right time for funding health care, there’s near-universal agreement among actuaries and benefits professionals that the time to fund these benefits is when they are earned. That’s the reason pension funds exist in the first place, so as not to pass the bill to a future generation.

Yet TRS-Care barely has enough money to get through the next two-year budget cycle and is projected to be $1.2 billion in the red by 2017. From there it gets worse, much worse.

Retiree health care is just a fraction of the mounting debt that’s threatening the state’s future. The Pew Center puts Texas’ total unfunded liability at $82 billion, and that’s using the pension funds’ own numbers, which assume annual returns of around 8 percent. When you account for the debt the same way markets do, the picture gets very bleak.

A study by the American Enterprise Institute using a risk-free discount rate put the state’s unfunded pension liability at $180.7 billion. Once you add in debt for health care and outstanding state bonds, the state’s total debt is around $287 billion.

For comparison, the state’s debt is roughly three times the size of its annual budget; that’s the same ratio the federal government has between its publicly held debt and its annual spending. So how is that possible in a state run by self-professed conservatives?

The simple reason is that lawmakers haven’t yet been forced to send taxpayers the bill for all the government they’ve been buying. Under current accounting rules, state and local governments can defer employee compensation costs for decades, and keep those debts off their balance sheets.

Once new rules go into effect this summer, lawmakers will have an impossible time ignoring the pension tsunami rolling in. For this final legislative session, they can still play at their sand castles on the beach, which is what they’ve done. The focus of debate has been whether a $12 billion surplus (rainy day fund) should best be spent on water projects, roads or schools.

The only members even hinting that the state needs to prepare for a tsunami rather than a rainy day are the 11 freshmen – Reps. Craig Goldman, Stephanie Klick and Matt Krause of Fort Worth, Jeff Leach of Plano, Rick Miller of Sugar Land, Jonathan Stickland of Bedford, Scott Sanford of McKinney, Matt Schaefer of Tyler, Drew Springer of Muenster, Steve Toth of the Woodlands, and Scott Turner of Richardson — and they haven’t been particularly bold. We contacted nine of the members and heard back from none.

Their amendments wouldn’t go very far in solving the problem — they move $10 million here and $500,000 there — but the roll call on those amendments will say something about which Republicans are inclined to do something about the state’s biggest problem and which ones are happy to look away.

That’s because the cuts are relatively easy and politically riskless. Schaefer wants to cut $10 million from the state lottery’s marketing budget and give the money to TRS-Care.

Turner would cut $49 million from the Texas Workforce Commission’s budget for Skills Development. That’s the money that goes to community colleges to teach employed forklift drivers how to drive forklifts and such, sparing their employers the cost.

Klick’s amendment would cut funding for the Governor’s Commission for Women by $447,450. This relic was created in 1967 by Gov. John Connally, who charged it to explore “ways for women to continue their roles as wives and mothers while contributing to the world around them and with recommending ways to end unequal policies affecting women,” according to the commission’s website.

Some 24 years the later, the women of the world still had issues with work-life balance, so Gov. Ann Richards appointed 29 new members “to improve the mental, physical, and emotional health of Texas women, as well as to maintain statistics on women and to track state and federal legislation.”

If Texas women are not yet models of Zen tranquility and physical fitness, it’s not for a lack of statistics accumulated by the commission.

The question raised by this group of freshmen, however diffidently, is if we can’t shut off the lights on a few obscure boards, how are we going to handle the much graver decisions awaiting the next Legislature?

Contact Jon Cassidy at jon@watchdog.org.

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Jon Cassidy is the Texas bureau chief for Watchdog.org. He also writes a weekly column on politics for The American Spectator. He was formerly a reporter and editor for The Orange County Register in California and a reporter at The Hill in Washington, D.C. His work has been published by Fox News, Reason, The Federalist, Human Events, and other publications. He is a 2014 Robert Novak Journalism Fellow and a graduate of the University of Southern California. He and his wife Michelle live just outside Houston with their two children.

  • Tough Love

    What BS. Just END any Taxpayer-funded retiree healthcare subsidy. The Private Sector Taxpayers don’t get this from THEIR employers so why should they pay for it for Public Sector workers … who earn no less in cash pay than their Private Sector counterparts.

    And while we’re at it, to the extent Public Sector pensions exceed those of Private Sector taxpayers (ANDTHEY DO by 2, 4, even 5+ times for safety workers), the Taxpayer-fund share of this should END as well.

    Taxpayers have been the SUCKER in this equation for FAR too long !

  • http://www.facebook.com/jonathan.cassidy2 Jonathan Cassidy

    Well, they’ve got legal rights to the benefits they’ve already earned, but reform is clearly needed going forward, so we can at least stop digging the hole.

  • http://www.facebook.com/joel.paull.16 Joel Paull

    NO, old fart.

    They voted for something unsustainable: To Eat Their Grandchildren! This, we shall not abide. My Grampy and Grammy didn’t do this to me, but left an inheritance, such as it was. They were good to me and loved me, and I loved them!

    You don’t get the “government you deserve”; rather, you “get the government you can afford”. You lose.

    Shame on you! Rescind the inequitable, don’t justify it.

  • Judy

    As a retired teacher, I truly understand tough love from the state. I will see a $1000 a month increase in health insurance starting September 2013. I am grateful that I have health insurance because my family could not survive without.

  • Tough Love

    I don’t see any expression of concern by you for the Private Sector (pre-Medicare) retirees w/o retiree healthcare insurance but whose taxes subsidize yours.

  • Judy

    the state of Texas only subsides $100.00 a month for my health care. how much does the U.S. Government subsidize for Medicare?

  • Tough Love

    You should have saved the 1.4% of pay the you would have paid toward medicare and not counted on the Taxpayers to pay for something for you that they don’t get.

  • evada

    I want my free health insurance. I deserve it!

  • Judy

    Tough love – I am a tax payer also. I love that Texas does not have a personal income tax so I am amazed that you seem to feel that TRS-Care is a burden on the taxpayers of Texas which is all of us because we all pay sales tax. Some of the lucky ones like me pay property tax also.

  • http://www.facebook.com/profile.php?id=100000067928822 Royce Ann Wiggins

    Teachers in Texas do pay the 1.4% Medicare Tax. They don’t pay social Security tax. I know because it is on the check stubs from the years I taught.

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