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The House Committee on Appropriations – S/C/ on Article III heard invited testimony only regarding interim charges related to the sustainability of TRS Care and the implementation of HB 3976 (85R) and HB 30 (85-1) and a review of appropriations to the Texas Education Agency for the E-rate Classroom Connectivity project.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Review the appropriations made to the Texas Education Agency (TEA) for the E-rate Classroom Connectivity project. Ensure that these funds are drawing down a federal match and are supporting projects that build high-speed broadband and infrastructure to and within schools.

 

Melody Parrish, Texas Education Agency

  • Presented update on E-rate project
  • Have been working in collaboration with internet providers and non-profit Education Superhighway
  • Requested $25 million in state matching funds – the FCC program would give an additional 10% to districts
  • Called this program the CCI – Classroom Connectivity Initiative
  • 83rd Session has legislation that required study of connectivity
    • 74% of campuses were below the target – did not have right bandwidth to take advantage of digital learning opportunities
  • Education Superhighway determined it would cost $225 million to implement to necessary infrastructure to provide high speed access to all of the campuses
  • 486 districts will benefit from the new fiber
  • 99% of school will have fiberoptic connections after the project
  • 44 districts will still have a campus that does not have connectivity – dependent on many factors
  • 85th Session – appropriated$25 million to the initiative
    • If the FCC did not provide the matching funds, then that $25 million would lapse
    • Sent status report on 8/1/18
  • FY 2017 – received 40 distinct applicant and 42 distinct applications
    • Total project cost – $60.1 million, E-rate request was $49.05 million
    • E-rate is dependent on free and reduced lunch percentage
  • FY 18 – 65 applicants and 80 applications
    • $194.2 million, E-rate $165.4 million – state matching was $18.1 million
  • Of $25 million allocated – 23.1 in currently incumbered
  • Giddings – a districts free and reduced lunch program is directly connected to e-rate, are most of schools fairly well equipped already?
    • Many districts are, but many in rural areas are not
    • Many in the urban areas are better equipped
    • Noted Dallas ISD has all campuses equipped with fiber
  • The districts that did not apply for funding – working to contact them regarding options for use of $1.5 million remaining
    • Some didn’t apply because of the additional local matching funds required
    • Noted the FCC application process is very difficult and may need some help
  • Giddings – that means that all of the Dallas campuses are connected, if they applied for this, they could still use the funds to upgrade their current system?
    • As long it is an approved project through the FCC
  • VanDeaver – the 44 districts that have at least one campus without fiber – and none of them applied for funding?
    • That is correct
  • VanDeaver – do we know the level assistance that the ESCs are providing? It is just surprising that they wouldn’t apply.
    • We are working on getting extension for the remaining $1.5 to give them opportunity to apply for some funding
    • It might be a simple call to a service center as it looks like many of those schools are grouped within a couple ESCs
  • VanDeaver – would ask that we get in touch with them to try to provide assistance
  • Noted timeline of approval of FY 17 projects at the federal level is about a year behind – concern with large FY 18 projects
  • Howard – can you give us perspective of students that are covered as opposed to campuses?
    • Will provide that information to the committee
  • Ashby – this is great to see, and believe the we all support the U.B. authority be granted
  • Gonzalez – this is really great for rural Texas, is there anything else that you need from the legislature to ensure these projects is successful?
    • Need to get FCC to approve the FY 18 projects
  • Howard – what is TEAs plan to build upon this?
    • There are a couple things: category 1 is fiber that runs from the connection to the building, category 2 is running it to the classroom
    • There is still some category 2 funding out there
    • Are working with Education superhighway and ESCs to help schools apply for that funding

 

 

Study the sustainability of TRS-Care and consider options for funding retired teacher health care in Texas, especially as it pertains to contributions being based on active employee payroll rather than the cost of health care. Monitor the implementation of H.B. 3976 (85R) and H.B. 30 (85(1)).

 

Brian Guthrie, Teacher Retirement System of Texas (TRS)

  • A lot of work was done last Session
  • Are looking at a shortfall this Session as expected
  • Written testimony reviews history of TRS
    • Program has always been built on premise of portion of payroll – that is the crux of the problem – payroll is not growing at the same rate as healthcare costs
  • 83rd Session made first fundamental change – eligibility rules
    • Individuals that retired before 62 would only be eligible for TRS 1
    • No longer have tiers – but that was the first indication that changes needed to be made due to costs
  • 85th Session provided funding
  • Average retiree care rates increased 50% in 2018 – was a shock to the system
  • Howard – do you know what happened with cost of living increase?
    • There were no changes to cost of living
  • It was as large increase because there was no longer a no cost option
  • Expected a decrease in membership – under 65 population, in reality it was the over 65 population that were finding alternative options
  • Ashby – were the majority of those people participant only or did they have dependents?
    • Primarily participant plus dependent
    • Noted the depended care was the one hit with higher premiums
  • Ashby – had about 30,000 drop coverage, what is the total pool?
    • About 250,000 total members
    • Katrina Daniel, TRS – about 233,000 members at present
  • Expecting shortfall in the biennium ending 2021
    • FY 2021 projected ending balance $410 million shortfall to maintain current plan
  • Gonzalez – can you expand on why this is a little better than expected?
    • Claim totals were not as costly as expected
    • Aggressively negotiated new contracts – saved roughly $300 million
    • Daniel – were expecting $500 million shortfall based on trends, had also factored in stair stepped premiums for pre-65 population – have not discussed premium increase at this point
    • Daniel – seeing significant savings in moving into Medicaid managed care option
  • Gonzalez – is the stair stepped increase in statute or just a proposal?
    • It was one of the proposals laid out as an option
  • Gonzalez – are you reconsidering the stair stepping at this point?
    • Cannot speak to future board decision, but there has been an effort to not have to raise premiums
    • Would be surprised if they took any action on premiums
  • Koop – agree with the Lt. Governor that the premiums should not rise, how should appropriators see that going into next Session?
    • You will be advised if that was a possibility before Session
    • The board would have to take action this month if that was to happen
    • Board is very aware and caution of legislative intent
  • Koop – at the point they make the decision, does that impact the bottom line?
  • Ashby – lets assume that the board went ahead with the increase, what would that bring the shortfall to?
    • About $275 million
  • Ashby – looking at next Session, we are depending on their action to fill the shortfall of between $410-275 million
    • Yes, the only thing that can change between now and then is the Medicaid advantage contract, we are hoping to have an updated figure that is a lower number than this
  • Howard – mentioned the efforts in managed care, we have seen that sometimes that means that you are not getting the needed care. Have concern about cost being the driver than the healthcare outcomes, recognizing that you are doing your best with what you are given. Want to take the opportunity to speak to a legacy fund from the ESF to help pay for things like this
  • Koop – if we do not find solution for TRS quickly we will spiral into situation like other pension plans which will affect credit ratings – agree that we all work to be aware of the Texas legacy options for next Session
  • Are in a situation where funding is based on payroll – members payroll grows at roughly 3% per year while healthcare costs are increasing by 11% per year
  • Discussed pay as you go premise – proposals look at that
  • Gonzalez – you are saying that one option is a large influx of money on a regular basis to maintain solvency?
    • That is one option
    • Any additional funding would be welcome
    • What is really needed is to appropriate enough to cover the program to not just be working toward zero – enough to fund an investment to funding into the future
  • Gonzalez – how much would that cost?
    • About $12 billion over a 10-year period
    • That would be for just maintain the current scenario
    • Would need more than that to provide a corpus
  • Ashby – would love to talk about long term out of the box ideas to get us away from it being an issue every 2 years
  • The most expensive members in the population is disabled
  • Average cost is $5,000 per member per year – lowers than ERS
  • Without competitive contracting, and active management the cost of the system is $7 billion per year
    • With management it is $1.3 billion per year
    • Still working to lower that number without sacrificing quality of care
    • Argues that quality of care remains the same but is more expensive – perhaps reducing access to the care
  • Giddings – seems that if you cannot afford it affects the quality of care
  • Howard – have you done any look into the number of people who have chosen not to access care due to costs?
    • Daniel – we have put programs in place to help deter that
    • Do not have specific number
  • Howard – would like to find a way to get a better handle on how cost is affecting people’s access to care – more than anecdotal
    • Will work with vendors to get more information on that
  • Ashby – noted that TRS stepped up every time we called and shows your willingness to work for your members
  • Koop – TRS Care is cheaper per person than ERS?
    • Average cost is about $5,000 per member per year – ERS is $6500 per year per member
    • We have more cost sharing that ERS does
  • Koop – so the discussion every year is related to the size of the system?
    • That is correct
    • Are working with all of the other system to find cost saving solutions, but our system is large
  • Ashby – related to sustainability options, can you summarize those?
    • there are two options: a pay as you go through h FY 2023 or to get through fiscal year 2029
    • the second option would cost about $10 billion at the current level of benefits
    • option 1 would be the same outline but $5 billion because it gets you through a shorter time period
    • it is a significant challenge

 

Timothy Lee, Texas Retired Teachers Association (TRTA)

  • TRS Care would have likely died without this subcommittee last Session
  • Implementation of HB 3976 was chaotic – it cancelled the insurance of 10s of thousands of people
    • Created a lot of uncertainty
    • It was a massive change
  • TRS did not have the staff to deal with member response
  • Supported the changes that were implemented but were inundated by lack of support by members on the actual implementation
  • Provider interpretation of the changes was the largest issue with the implementation
  • When somebody leaves – there is a process – that process was overwhelmed
    • During the initial implementation CMS received a file of the entire population as receiving the changes – the issues with automatically cancelling those who were in process or getting out
    • Led to a lot of frustration among members – especially with over 65 population
  • Have a number of retirees that with dependents – would recommend the removal of individual deductibles
  • Noted aggressive marketing by alternative plans to offer individual plans to retirees
    • Difficulty in getting in contact with TRS led to many talking with alternative plans
  • Would strongly support additional FTEs to help provide member support
  • Expecting to see another opportunity individual market place offers at next Session
  • Should have some allowance for members to rejoin after leaving
  • Supports not raising premiums – but creates funding shortfall, need to find alternative funding mechanisms
    • Is the payroll option the best way to go? It could be to a point
  • Knows the agency is providing significant savings, but now when hear “savings” really hear shifting of cost
  • One-size programs does not fit all
  • Questions the benefits of inviting those who left back into the plan to help reduce costs over all
    • Agency does not think it will make a huge difference at this point
  • If we had better numbers related to break down what they would give up if somebody was considering leaving TRS Care
    • Believe that those who left will find that they are going to end up paying more
    • Need to get that information out to people
  • Believe there has been a lot of cost shifting
  • Can continue to use percentage of payroll if 2 things occur:
    • Pay teachers more
    • Change base funding for TRS Care
  • Suggest using the ERS model – based on actual cost of providing care
  • Cannot afford TRS Care as it is right now – more funding is necessary for the plan to be sustainable
  • Gonzalez – can a member that leaves come back?
    • There are provisions for those under 65 to come back at 65
    • If over 65 you are not allowed to come back

 

John Grey, Texas State Teachers Association (TSTA)

  • TRS Care has a funding problem
    • Linked to teacher pay, which does not have any bearing on cost of healthcare
  • Legislature needs to deal with this during the next Session
  • Need cost of inflation index associated with funding
  • It is a multi-faceted funding issue with healthcare on one side and pension funding issues on the other
  • Access without funding is not access

 

Ann Fickel, Texas Classroom Teachers Association (TCTA)

  • Increased funding last Session was helpful but not enough
  • Need to keep the benefits at a high level as we make changes
  • Noted the incompatibility on basing funding to teacher payroll
    • Ok to use it for some level of funding, but not to solely fund the plan
  • Asked that an increased burned on the teachers to help fund the plan
  • Understand that using ESF funding is not a stable source for ongoing funding but appreciate the idea that it could contribute and is a new method of finance

 

Questions to the panel

  • Koop – related to prescriptions, do they have choice of prescription plans like they do in Medicare?
    • Lee – TRS Care has a prescription component that they cover
    • Lee – TRS has a PBM – a very rich part of the TRS Care benefit
  • Koop – so there was never an effort to looking to a Medicare model that could be a benefit?
    • Lee – The benefit is the agency can tailor make a plan for the group
  • Koop – but some people would not be appropriately covered?
    • Lee – from our side the prescriptions coverage is the richest part of the TRS Care plan, it is the other side that we have issues with, when the physicians are only working with certain providers

 

Ted Raab, Texas American Federation of Teachers (Texas AFT)

  • Bulk of dissatisfaction comes from those in the Medicare advantage plan that saw very high increases in spousal coverage
  • The others with concerns are those who are not yet eligible for Medicare
  • The number one outrage is people who retired years ago with an expectation that their medical benefits would continue as is and without pension increases and in the last year many changes have bee n made
  • Consideration of removing some of the burden off of the teachers should be an area of focus in the next Session
  • Continue to support prefunding – does not have to be done all at once

 

Beaman Floyd, Texas Association of School Administrators (TASA)

  • Defends payroll-based funding
  • Noted that the school district is a unique payor – it may not be the best method for handling inflation
  • Payroll base is something that can be planned and paid for
  • There is a limitation with a statutory sliding scale – noted the cap at the top of the range is important to the districts
  • Discussed the district funding strains and if more is required in one area it will pull from another

 

Monty Exter, The Association of Texas Professional Educators (ATPE)

  • Thanked chairman Ashby for efforts last Session
  • Without insistence for some formula funding to be included would be requiring supplemental funding year after year – not a stable situation
  • Increases to the base would be beneficial moving forward
    • Recommends the funding be considered on a long-term basis
  • Some points brought up by members include: access and affordability related to prescriptions and increased access to customer service
    • Should look at considering and implementing a list of low-cost medications
    • Additional FTEs and resources for TRS customer care
  • Need to allow people to rejoin the plan – many of the people who have left are good customers for TRS
  • Active care will be a topic that needs additional work as will the pension in the coming Session

 

Questions to the panel

  • Koop – there is in flexible spending account for retirees?
    • Exter – not aware of that program
    • Raab – active care does have cafeteria options
  • Koop – related to prescription drugs – you have to meet the deductible before any payment for drugs on the care side?
    • Exter – it is not a breakdown like a typical plan