Nearly one-third of that is cash allotted directly to state and local governments. But the bill is expected to be dead-on-arrival in the Senate.
In Texas, 15 mayors lobbied Congress to provide exactly this type of funding as tax revenues have dipped due in significant part to their own closure orders which all-but-evaporated sales and other consumption tax revenues.
Regardless, governments across the board are struggling with their finances because of coronavirus just as the private sector is.
But the government’s fiscal problems, at all levels, far preceded this global pandemic.
The foremost example is Washington, D.C., as the national debt is nearing $25.3 trillion. Spending by Congress — and approved by presidential administrations from both parties going back a century — has spurred ahead with little disruption and disrepute.
It is a very real possibility that Social Security payouts will be missed down the road, resulting in a significant financial blow for those who have spent decades paying into the system expecting to receive what they were promised.
Meanwhile, the public pension systems in Texas, both state and local collectively, have amassed $86 billion in unfunded liabilities.
An unfunded liability is money owed but not accounted for by the financing entity.
Astoundingly, the Texas Teachers Retirement System makes up more than half of that number. In 2019, the 86th Legislature passed Senate Bill 12 which increased the contribution amounts over the next six years and allotted $1.1 billion from the state’s savings account to give retired teachers a one-time supplemental payment.
There are nearly three million pensioners throughout these Texas systems.
Each pension may have a different amortization period, or the length of time it takes the financier to pay off the current debt at current levels of contributions. In Texas, they range anywhere from zero years — those who’ve paid more into the system than they currently owe — to an infinite amount of time.
The Pension Review Board (PRB) considers a pension system “actuarily sound” if the amortization period is below 30 years. A total of 34 pension systems across Texas, 31 local and 3 state, have an amortization period over 30 years.
Those 15 mayors combined owe $13.7 billion in unfunded liabilities, 90 percent of which comes from Austin, Dallas, Houston, and Fort Worth.
The City of Dallas is currently being sued by its Police and Firefighters Pension System for missing $2 million of payments to its pensioners.
In total, the local public pensions in Texas have $20 billion in unfunded liabilities. This includes the $4.3 billion from the Texas Municipal Retirement System (TMRS), an amalgamation system for cities not big enough to finance their own independent pension systems. Cities that are part of the TMRS pay into the system just as they would their own.
For the TMRS, the total in unfunded liabilities comes out to $18,082 per payee.
Not including TMRS, the localities collectively owe $75,000 per payee.
Some notable examples are Dallas’ Police and Fire which owes $220,000 per payee; Beaumont Firemen’s Relief & Retirement Fund which owes $201,000 per payee; Austin Police Retirement System with just shy of $200,000 owed per payee; Longview Firemen’s Relief & Retirement Fund at $193,000 per payee; and Odessa Firemen’s Relief & Retirement Fund which owes $186,000 per payee.
Governments like to backend the cost of employment by providing attractive pensions rather than equivalent salary increases across a career. But many have mishandled their finances so that these promises are now in jeopardy.
Notably, some of the localities have managed their pension systems well and are in the green (i.e. paid more than is owed). These are Arlington, one of El Paso’s three pension systems, and Plano — along with two community hospitals, Anson General Hospital and Citizens Medical Center.
In their May meeting, the Pension Review Board acknowledged that, while reporting their actuarily determined contributions were being made, some localities were not actually making them.
Texas is not in nearly as bad a shape as Illinois — which owes $241 billion to its pension system — but $86 billion is substantial, especially for those who may not receive what they were promised and the taxpayers who foot the bill.
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Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.