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 insurinal program launching costs. In 2003, the first year of fiill 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 taxesborne 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. seemed obsessed with the idea of freeloading bus drivers exploiting the sys tern. Analyzing the benefits to parttime 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 \(Rtions.”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 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 [it],” 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 state’s contribution to the fund of 6 percent of pay is the minimum mandated by the constitution. Em ployees contribute 6.4 percent, deduct ed 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 per cent must be funneled into the trust fund.As part of the appropriations com mittee recommendations, active teach ers payments into the trust fiend would continued on page 20 3/28/03 THE TEXAS OBSERVER 9
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