DALLAS – Large state pension plans in Texas are financially stable but local government employee retirement programs would benefit from more public oversight and transparency, Comptroller Susan Combs said Tuesday.
Six of the eight statewide plans have funded ratios of more than 80%, Combs said, but none is fully funded. Most on are track to be fully funded in 30 years.
“Stability-wise, we’re actually in pretty doggone good shape,” Combs said of the Teacher Retirement System of Texas and the Employees Retirement System of Texas, the two largest plans with more than 1.6 million members combined.
The two plans cover 70% of state and local government pension plan members.
The new report on pension obligations owed by state and local governments is the fourth and final series on public finance released this year by the Comptroller’s Office.
The eight statewide and 81 local retirement plans in Texas cover 2.3 million active and retired members. The six largest plans include 93% of all those covered.
The 89 plans have $206.7 billion of combined actuarial assets and liabilities of $250 billion. The combined funded ratio for all plans is 82.5%.
Combs said local government pension systems are not as well funded as the statewide ones.
"There are some warning signs in Texas," she said at Tuesday’s news conference in Austin. More than 30% of the local plans have funded ratios of less than 80% and amortization periods of more than 30 years, the report.
“Texas’ public pension situation doesn’t appear as alarming as the problems faced by some other states, “Combs said. “But the cost of these state and local obligations are growing, and we shouldn’t assume that problems will never arise.”
Houston, which is suing its firefighter pension fund to obtain its financial records, was cited by Combs as a warning to other Texas cities. Stockton, Calif., filed for bankruptcy in June due to pressure from generous benefits promised by its pension system, she said.
“A California-style problem could one day be in the cards for some cities, which has the effect of exerting downward pressure on other parts of your local budget,” Combs said at Tuesday’s news conference in Austin.
Combs will provide recommendations for changes to improve public pension systems when the Legislature convenes in January, but did not take a position on whether to replace the current system of defined benefits with the 401(k) plans common in the private sector.
"You may be able to have a great defined benefit plan, depending on what's going on,” Combs said. “We're agnostic on that.”
The pension report is prompted by a desire for more transparency and is not a call for pension overhaul, she said.
“The challenges facing these systems are significant and will continue, calling for continuing vigilance from our leaders and our citizens,” she said.