In Texas GOP circles these days almost nothing is as sacrosanct as tax relief.
In fact, you’re about as likely to catch a Republican arguing against a tax cut as you are to nab the elusive chupacabra.
At today’s Senate Finance Committee Sen. Kevin Eltife (R-Tyler) pretty much went there.
Eltife said state pension funds have been “shortchanged for years,” and something needs to be done before lawmakers consider cutting taxes.
“We should have made the tough decisions to either raise taxes or cut [benefits],” Eltife said. “The reason we’re in this mess is because we haven’t made the tough decisions over the last 10 years.”
The senator’s comments come on the heels of last month’s report from Moody’s, a bond credit rating business, warning state lawmakers to shore up Texas pension funds.
Texas has several state-funded pension funds. The largest, the $128 billion Teacher Retirement System, has unfunded liabilities of $28.9 billion. The second largest, the $25 billion Employee Retirement System (ERS), faces a $7.2 billion shortfall. It is normal for large pension funds to have unfunded liabilities but if they grow too large, it can be difficult for the pensions to make good on promises to future retirees. A rule of thumb for a fund’s health is that the assets-to-benefits ratio not dip below 80 percent. TRS’ ratio sits at about 81 percent. As a result of changes made last session—the Legislature changed benefit plans and chipped in more money—TRS is “actuarially sound,” according to the fund’s managers in a report to the Legislature. It is “one of the best funded public pensions in the nation,” the report states.
Still, lawmakers are concerned with the long-term performance of the funds, especially ERS, which has a funded ratio of about 77 percent.
“Eighteen of the past 20 years the Legislature has underfunded the ERS retirement system,” said Sen. Kirk Watson (D-Austin). “It is the fault of the Legislature that we’re having this discussion. We’re concerned about how big the nut is that we’re going to need to crack.”
According to the Moody’s report, Texas faces “rising pension costs due to a history of contributions below actuarial requirements.”
Moody’s laid out the options: Increase funding, reduce benefits, or eventually run out of money.
Eltife’s position got plenty of pushback from other committee members.
Sen. Charles Schwertner (R-Georgetown) and Sen. Joan Huffman, (R-Houston) both seemed to reject Eltife’s comments about the urgency of pension funding.
“Texas is doing much better than other states,” Schwertner said. The problem is not how much the state is taxing, but “how much we are obliged to pay through entitlement programs.“