We’ve got good reason to be proud of this state,” Gov. Rick Perry told assembled legislators in his State of the State speech on February 11. He then proceeded to list why. Third on Perry’s sunny catalogue of accomplishments-right before half a million kids covered under the Children’s Health Insurance Program (CHIP)-came recent increases in the number of teachers. “Thousands of teachers have migrated to Texas in recent years because of improved benefits,” boasted the governor.
It’s true Perry didn’t mention that those thousands of teachers arrived not a moment too soon. And that many more were needed. Concern over a Texas teacher shortage had led in part to the creation in the 77th Legislature of an interim study committee. It discovered that the state is short 30,000 teachers, with a possible shortfall of as many as 50,000 in the near future, according to committee member, Rep. Sylvester Turner (D-Houston). This comes at a time when state leaders are demanding students produce higher scores on harder tests. But still, thanks to the Legislature last session, benefits for retired public school employees, and particularly those currently employed, had increased enough to allow teachers and retirees to break the confines of a miserly subsistence. And, as Perry noted, it had worked to entice more teachers.
What a difference a month can make. The Republican failure of leadership-epitomized by Perry’s zero-based budget dodge and his adamant insistence on no new taxes-came to its logical conclusion on March 13th at the House Appropriations Committee meeting. There, the members discussed proposed draconian cuts in teacher and retiree health and pension programs that are already billions of dollars short. What the representatives didn’t belabor was that despite the planned gouging, if Republicans insist on not raising more revenue, they might have to cut benefits for retirees again next session, only more severely.
Some in the leadership are so bent on privatizing education and eliminating government that they may see a silver lining in the fact that these cuts might drive away desperately needed public servants. But the more experienced among them, such as Perry, likely understand the political peril. It is one thing to go after poor children (CHIP has been targeted for drastic cuts or outright elimination) and struggling low-income families. By and large they are unorganized and don’t vote. Teachers are a different matter entirely.
Teacher Retirement System (TRS) administrators estimate that at least one in twenty Texans are in their system, either paying for future benefits or receiving them presently. The number is much higher if affected family members are included. While teachers have traditionally cast ballots for Democrats, in the last election they did not vote in sufficient numbers to cause Republicans much inconvenience. When riled, though, they can be one of the most potent political forces in Texas. Teachers are largely credited in 1986 for turning Mark White out of the governor’s mansion. Rep. Turner, for one, warns of a day of reckoning if the proposed cuts are allowed to stand. “If the cuts remain as they are, there is no question in my mind that we will hear from teachers and others when this session is over” he says, “and we should.”
There are three legs in the TRS system-health care assistance for current school employees, health insurance for those who have retired, and a retiree pension fund; all three are now wobbly and in desperate need of reinforcement. At the same time the governor was extolling teacher benefits, he was well aware they were threatened, having been briefed since before the election on the status of TRS. In particular, he knew funding increases passed last session to help active teachers struggling to pay spiraling health care costs could likely be reduced or eliminated.
The Republicans’ fumbling efforts to deal with the crisis began almost immediately after Perry’s address. On Feb. 14, TRS Executive Director Charles Dunlap wrote the governor that his proposed building block approach (which were actually 12 percent across-the-board cuts) would decimate the agency’s programs. “We thought you would want to know immediately of the possible implications,” explained Dunlap.
The cuts forced TRS to prioritize just like the governor said he wanted. After safeguarding the constitutionally mandated pension fund, at least for the next biennium, the agency turned to retired teacher health insurance, known as TRS Care. After the proposed cuts, the agency only had enough to fund 38 percent of the program, creating a deficit of about $854 million. And there was nothing left over for active teacher health insurance.
The Active Care benefits, established for current public school employees by HB 3343, went into effect in September 2002. The bill, which had bipartisan support in the house and the senate, committed the state to send about $75 a month per employee to school districts, plus $1000 a year to the employee, to help defray their medical insurance costs. TRS statistics indicate that about 75 percent of members use the money for health insurance. (School employees who wish to cover their families can find themselves spending as much as $6,000 to $8,000 a year on health insurance.) In 2002, the state only had nominal program launching costs. In 2003, the first year of full implementation, the program will cost the state $692.5 million. Fully funding the $1000 pass through for the 2004-05 biennium will take another $1.23 billion.
Under the proposals recently floated in the appropriations committee, Active Care benefits would be cut in some cases by more than half. Current teachers, nurses, counselors, and librarians would now receive $550 instead of $1,000. Support staff would get $300 and part-time employees would receive $200. All new teachers would have to wait 90 days for their benefits to begin. School districts would also be required to provide a larger share of health benefits that will likely be passed on as increased property taxes-borne in part by school employees.
The proposed cuts especially targeted low-wage school employees, those who could least afford them. Republican leaders argued that teachers had more training and so should receive more compensation. For some on the committee though, wielding the scalpel against low-wage employees appeared to come from some deeper ideological well spring, a place where low-wage workers are objects of contempt.
Freshman Rep. Jack Stick (R-Austin) seemed obsessed with the idea of freeloading bus drivers exploiting the system. Analyzing the benefits to part-time workers, Stick fretted that this money would go to “a bus driver who drives 15 minutes a day once a week.” Even Chairman Talmadge Heflin (R-Houston) couldn’t abide Stick’s distortions. “We realize they don’t work a full schedule, but that is a bit of a mischaracterization,” scolded Heflin.
But it is the cuts in retiree benefits that likely will cause the most suffering. In December 2002, TRS informed legislators and Gov. Perry that the retiree health system would need $1.148 billion supplemental funding for the 2004-05 biennium. It should have come as no surprise. Established in 1985, funding for TRS Care was only supposed to last 10 years, but lawmakers managed to eke 18 years out of the program. Despite additional supplemental funding from the state in recent years, the rising cost of health care, capped state contributions, and an increased number of retirees resulted in the current shortfall.
The average TRS retiree lives on about $1,700 a month. There are 151,000 of them that receive health insurance under the TRS Care program, which is funded by .25 percent of active public school member salaries and .50 percent from the state. Recognizing that the program was faltering, the Texas Retired Teachers Association (TRTA) offered to raise copays for drug prescriptions and doctor visits, saving the state about $86 million. The retirees did so, even though their premiums had increased as many as six times since 1989 and they are forced to subsist on a meager fixed income. “Each time retirees received an annuity increase, TRS Care premiums reduced ,” notes Mike Lehr, legislative coordinator for the TRTA.
It wasn’t enough for legislative budget cutters. They recommended that premiums for retiree health insurance rise by an average 33 percent. The contributions of active teachers to the retiree health plan would rise as well.
At the appropriations committee hearing one of the few voices raised in protest was that of Rep. Sylvester Turner. He pressed TRS administrators and his fellow representatives to explore the impact of the cuts. How many active and retired school employees would no longer be able to afford insurance, Turner asked. “It may not appear to be a lot of money to us, but if you are already on the margin, it may be a lot,” he admonished.
By mutual agreement this session, legislators and TRS administrators have decided to put off confronting the crisis facing the teacher retirement pension fund. In the past three years the fund has lost about $20 billion in investment value, dropping from a high of $90 billion in 2000. The system, which paid out $4.5 billion in benefits in fiscal year 2002, has an unfunded liability of $3.3 billion. As the number of retirees increases, the gap will only get larger.
As early as last October, one month before the election, TRS and the governor knew exactly how bad the situation stood for the teacher’s pension fund. There is even a name for it: “actuarial infinity.” Because the normal cost of maintaining the program exceeds the combined contribution rate, any amount of unfunded liability can never be amortized without either a significant increase in investment returns or increased contributions.
Under questioning by senators, TRS Executive Director Dunlap explained it like this: “The contribution rate is like your paycheck and the normal cost would be like a mortgage payment. If the mortgage payment is more than your paycheck, no matter how big your assets are, you can’t amortize it.”
The states contribution to the fund of 6 percent of pay is the minimum mandated by the constitution. Employees contribute 6.4 percent, deducted from their paychecks. Together the two contributions total 12.4 percent. Unfortunately at the present time, to ensure that benefits will be amortized over 30 years as is required, 12.67 percent must be funneled into the trust fund. As part of the appropriations committee recommendations, active teachers payments into the trust fund would also increase.
For retirees, not only is the future of their plan imperiled unless a steady flow of increased revenue is forthcoming, the poor actuarial assessment means that the state is forbidden by statute from providing any cost-of-living increases. The TRS actuary has cautioned that retirees might not see increases in pension benefits for the rest of the decade.
The week after the appropriations committee approved the recommended cuts teachers and retirees massed at the Capitol to let their feelings be known. In a Monday afternoon rally by the Texas Federation of Teachers, energized educators from around the state gathered to voice their disapproval and vow retribution.
Democratic legislators lined up to speak to the boisterous crowd which carried signs that read “no cuts for kids” and “health insurance like the governor has.” Rep. Garnet Coleman (D-Houston) made sure to thank the bus drivers in attendance for the important work of shepherding kids safely between school and home. But it was Sen. Rodney Ellis (D-Houston) who, echoing many of his colleagues, had a simple message for the gathered teachers: “For those who are not with you, put them out of office.”