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The Senate Committee on Finance met on May 4th to hear invited and public testimony on interim charges related to the effect of inflation on public and private entities, options for state asset owners to divest from companies investing in Russia, and the effect of recent state pension reforms on the Employees Retirement System and the Teacher Retirement System. A video archive of the hearing can be found here.

This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions 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.

 

Opening Comments

  • Chair Joan Huffman budget analysts –
    • Alyssa Jones on Art II
    • Patrick Philpott on Art III
    • Sean Opperman as Senior Budget Advisor
  • Hinojosa – Suzzana Seargeant will lead on Finance
  • Whitmire – Lara Wendler will lead on Finance
  • Nichols – Different staff will be handling different articles in the office
  • Huffman – Will take up several interim charges that relate to real-world concerns; have also asked LBB and Comptroller to present on constitutional limits on state spending

 

LBB & Comptroller Budget Overview

 

Kevin Kavanaugh, Legislative Budget Board

  • Link to LBB presentation on spending limits
  • Texas Constitution incl. 4 limits on state spending: debt limit (spending cant exceed 5% of previous 2 biennia), welfare spending limit (cant exceed 1%), pay as you go (approps cant exceed what Comptroller specifies is available), tax spending limit (growth of approps from nondedicated tax revenue cant exceed estimated state growth)
  • New limit will apply to upcoming 2024-25 budget, will speak on this later
  • On tax spending limit, legislature can enact bills to implement this limit; approps limited by this incl. sales tax (aside from SHF and TPWD dedicated funds); motor fuels taxes are not restricted by this, all non-tax revenue is not restricted by this limit
  • $18.6b dedicated by constitution, 86.3% of all tax revenue is not dedicated and thus subject to the limit
  • Gov. Code directs LBB to use growth rate of personal income, tax spending limit judged against this value; LBB and Legislature meet a few months before session and decide among a few options, set at 7.06% before in 2020
  • If the LBB does not adopt a growth rate, it is set at zero; limits can be exceed with majority vote of both chambers in emergency
  • Comptroller Hegar will speak on pay as you go limit
  • Pay-as-you-go $12b of authority left, tax spending limit $3.6b left; as tax spending limit has $3.6b left and is lower, this is the “controlling” limit as it will be hit first
  • Things that inform spending capacity: Comptroller estimates, legislation changing revenue, and supplemental appropriations
  • New limit for 2024-25 on consolidated general revenue appropriations, new limit will use compounded growth of state population and inflation; exempts appropriations used to pay for tax relief or costs associated with disaster recovery; can be exceeded by 3/5ths vote of the legislature
  • Huffman – Can you give us a sense of what supplemental needs may look like in the next session?
    • Legislature did have a sense that there may be a Medicaid supplemental need, could be offset by funds available in the Foundation School Program
  • Huffman – We’ll have to adopt two spending limits? How do you envision this working?
    • Yes, still working on this; makes sense to do both at the same time, but doesn’t have to be this way
  • Huffman – Will the tax spending limit also be the controlling one?
    • Won’t know until the new limit is adopted; one of the three spending limits will be the controlling limit, whichever is lowest
    • During growth, tax spending limit tends to be the lowest, during contraction pay-as-you-go tends to be lowest
  • Whitmire – Different agencies have been drawn down for the border initiative, do you have a running tally of what we may need to supplement those agencies with?
    • No good estimate yet
  • Whitmire – Will be significant I assume?
    • Yes, will have a better picture this summer
  • Whitmire – Balances outstanding look good, but also have great needs, will have a sizable supplemental come January I would guess
  • Hinojosa – Will the supplemental next session reduce the spending limit for 2024-25?
    • Essentially increases 2024-25 limit as it raises the base
  • Hinojosa – How does that work?
    • Growing off of a higher base in 2022-23
  • Kolkhorst – With TDCJ, etc. that have monies going out, we will have a supplemental that makes these agencies whole?
  • Huffman – Agencies have received money that covers holes, but will get complicated next session as funds need to be swapped
  • Kolkhorst – Moving money for these as we’re able to come back in during the current biennium
  • Huffman – Yes, no intention of cutting TDCJ and HHSC, just need to work the math out
  • Kolkhorst – Just want to highlight this as articles are written that we’re cutting programs
  • West – Highlights kinship care increase that legislature passed a bill on, but agency has not increased the rate

 

Brad Reynolds, Comptroller’s Office

  • Art III Section 49(a) of the Texas Constitution requires that approps not exceed amounts available as estimated by the Comptroller
  • Pay-as-you-go is essentially based on amount available for certification, can change as legislature passes bills affecting amount available via certification; Comptroller notifies legislature about fiscal impacts through fiscal notes
  • After each cycle, Comptroller issues a Certification Revenue Estimate (CRE) that takes into account all of these legislative changes
  • Current CRE was done in November and anticipates $11.99b at the end of FY2023
  • Huffman – What have tax collections looked like since the last estimate in Nov?
    • Some major sources have been coming in above estimate, incl. oil severance, estimated $75 per barrel but seeing $81 and may continue to rise
    • Prices have risen since Russian invasion of Ukraine, and expect these revenues to remain high as oil remain over $100
    • Natural gas prices have also been unexpectedly high
    • Sales tax has also been very strong
  • Huffman – Does the Comptroller plan to update the estimate before the Biennial Revenue Estimate (BRE)?
    • Will be doing a re-assessment over the summer & will probably be a revenue estimate revision
  • Perry – Gross revenues are going up, but also gross expenditures are going up
  • Perry – Budget also included a lot of one-time federal swaps, if we pulled these out can you give us a true economic reflection of what growth looks like?
    • CRE balance of $12b is only for GR-related funds and federal funds are excluded
    • Up by $3.8b in swaps from the coronavirus relief funds
  • Perry – So if we took that out we would be somewhere around $9b surplus? Important to remember this

 

Inflation: Review and report on the effect inflation is having on the business community and state government, including state salaries, retiree benefits, the state economy, and cost of state services.

Inflation: Review and report on the impact of inflation on units of local governments’ revenue collections and property taxpayers’ tax bills, including the homestead exemption.

 

Brad Reynolds, Comptroller’s Office

  • Inflation exceeded 4% in calendar 2021, very noticeable increase over what has been experienced recently; roughly 2% over last decade
  • Hardly unprecedented and still below what was experienced in the 1970s and 1980s
  • Did decline during the pandemic, but started to pick up again over 2021, hit 8.5% year over year by the end of 2021
  • Huffman – So it really started going up in Feb or Mar of 2021?
    • Yes
  • Huffman – Rise was beginning on inflation long before Russia invaded Ukraine
    • Correct, war has exacerbated inflation, but there was already significant inflation underway
  • Huffman – Anything you’re looking at that makes you think it will continue to rise?
    • I don’t think it will continue to get higher, some forecasts predict 9%
    • One of the big drivers is fuel prices & oil prices have peaked and started to come back down from the start of the Ukraine invasion; gas prices may stay, but if they don’t go up this isn’t inflation
  • Nichols – CPI is defined by the federal gov, but that formula has changed over time; changed in 1990 & 1980; would have been much larger than 7%
    • CPI calculations are modified over time, this is because items being purchased are changing
    • Weights leading to CPI calculations change over time as what households spend differs from the 1980s, e.g. cellphone plans and cable subscriptions
  • Nichols – I think they change those dramatically, for instance social security is based on
  • Hancock – Diesel has hit record highs seven days in a row, not sure we’re done
    • This will hit other sectors, but because households aren’t heavy diesel users this won’t affect CPI
  • Hancock – Discontinuing O&G purchases from Russia could also affect this, electricity prices are up; we’re at a peak, but not sure we’re at the peak
  • Huffman – Can’t forget diesel cost and effect on agriculture
  • West – When did the supply chain problems really start and what impact has that had on inflation?
    • Were happening 2020 with products like semiconductors, etc.
    • First several months of inflation probably driven more by supply-side factors, more recently likely driven more by demand
    • Federal response to pandemic was extraordinary in terms of income support, household sector built up savings and people are now spending more and spending down savings built up over pandemic
    • Current inflation is a product of both supply & demand
  • Hinojosa – Seems to me income support went to many households, but went out quickly due to increasing prices for household goods and property taxes; will this be managed better?
    • Have a slide later on inflation and home prices
    • Legislation passed recently means that just because appraisals rise doesn’t mean property taxes rise commensurately
  • Hinojosa – Hope you’re right, bipartisan issue
  • West – Agrees it is a bipartisan issue
  • Huffman – I’ve had people argue with me that’s not what we did
  • Bettencourt – That is what we did
  • Hancock – School district tax rate setting won’t be until August; appraisals are in now, but rate won’t be done until later, many not realizing that there are limits through SB 2 and HB 3 and many will need to move tax rate off of that $1.50 cap
  • Bettencourt – Sen. Hinojosa voted for both SB 2 and HB 3; Tax rates will tumble in the fall, those on homesteads already will be pleasantly surprised
  • Bettencourt – Highlights homestead status, have a 10% appraisal cap and tax rate with substantially tumble
  • Bettencourt – On inflation, agree with Sen. Nichols that it looks like inflation will climb higher; there will be a time when homeowner budgets will not be able to keep up with inflation, when do you see this happen?
    • This is part of what we will be reassessing this summer as part of the economic outlook
    • Need to look at rate at which aggregate household savings is being diminished, but analysts suggest this will take another year to a year and a half
  • Bettencourt – Seeing rent increases of 24% in Dallas, not theoretical; inflation will continue and disposable income is being consumed by other factors like rents
  • Perry – Is the reason we have inflation due to an over-productive money supply
    • This was true before the great
  • Perry – Until the fed stops printing money, inflation will stay equal or increase; we’re still printing money we shouldn’t, true or not true?
    • Will be announcing another policy change later today; have announced increased policy rate and will accelerate diminishing balance sheet
    • Will no longer be net purchaser of bonds
  • Perry – Question of how long inflation lasts is tied to federal gov printing money; probably won’t happen before the next BRE
  • Perry – Highlights that cost of construction will continue to rise, if inflation is temporary, we don’t need to build during this period
  • Perry – On the BRE, our growth has an 8% inflated value, if not for inflation then we wouldn’t have this; we’re going to spend that 8%
    • Most of our revenues do inflate, motor fuels is static, cigarette tax is static, btu this is a small part of the mix; most tax revenues inflate
    • Inflation is not really a stressor of the revenue system, stressor is the escalating costs on things state agencies are instructed to spend money on
  • Perry – This is my point, likely to see $46b in increased costs; highlights competition with market salaries
  • Perry – People often only hear that we have a lot of revenue, but this is due to inflation; if narrative is Texas has $320b to spend, the coupled point is that we will spend all of this and need it due to inflation
  • Kolkhorst – CPI has changed since 1980, rate might be higher now
    • If you use the same weights yes; there is also another hedonic adjustment that is more controversial
  • Kolkhorst – Problem with commercial real estate is that if an apartment complex went up 500%, city rate cap won’t help you; rents will go up astronomically and costs will be passed on
  • Huffman – Asks after construction prices
    • Reporting that they’re experiencing notable increases in construction costs
  • Huffman – Can you talk about inflation will affect property taxes and purchasing power
    • When dollar amounts of certain exemptions are set to a certain number, inflation will mean value of the benefit to taxpayers is declining
    • Homestead was raised to $25k in 97 has declined over time, raised to $25k in 2015, pending voter approval it will go to $40k
  • Bettencourt – Over time exemptions are increasing, time period between exemption increases is also decreasing & this is a good thing
  • Perry – Any opinion on GDP as measure of recession
    • Decline in GDP during first quarter is largely due to decline in inventory investment
    • Absent that other major elements of GDP
  • Perry – Come June 30th if you had a consecutive quarter, what would that do to Comptroller’s estimate?
    • Will analyze this in relation to everything else, no fixed relation
  • Perry – Recession gives me pause
    • Indications of slowing economic activity, whether it will get to recession or not can’t say

 

Jim Diffley, IHS Market/S&P Global

  • Agree basically with everything Brad Reynolds said
  • Have seen sharpest fall and sharpest rise over course of pandemic, have seen return to full employment in 2022 and very tight labor markets
  • PPI was 11%, connected to supply issue
  • 8.5% is total inflation, core inflation is a different matter
  • Federal reserve will raise the fund rate to 1%, and continue to raise over the next few years to 3%
  • Projections are that inflation will moderate to about 5.2% over the next year, declining to 2.8% in 2023 assuming supply chain normalizes
  • This is accomplished without pushing economy into recession
  • Campbell – Don’t expect GDP to contract in the next quarter?
    • Correct, not unusual for GDP to contract in a quarter, but factors were external, tied to shrinkage in inventories and foreign investment
    • Domestic demand was outpacing
  • Campbell – Why do you minimize food & fuel
    • Not minimizing, very volatile and want to look at what the month-to-month change actually is
  • Campbell – Do you think decline in gas prices is due to using reserves?
    • To some extent, but gas prices are calming after overshooting
  • Campbell – Some of that overshooting is because we have restriction on domestic oil production and don’t see any loosening
    • Don’t have an opinion on this, but you’re correct
  • Bettencourt – Agrees with Campbell; baseline shift in economy
    • True, looking at just-in-time supply and re-evaluating
  • Bettencourt – Also have a tremendous amount of liquidity in the system & cash balances will bleed off at some time
    • Federal reserve has been acting, was increasing money supply up until this year
    • There was a lot of savings during the pandemic, but also a lot of increased revenue due to sales tax
    • There were also gains in the stock market, home prices, etc. that leads to a lot of spending
  • Bettencourt – 5% assumption seems optimistic
    • Also haven’t touched on wages, have been slow to catch up, but they are catching up and expect they will catch up
    • Labor markets are very tight
  • Kolkhorst – What impact will the 5 week lockdown in Shanghai have, thinking it might be purposeful
    • There are plans to start chip fabrication in the USA, but this takes time
    • This is a problem and hopefully it will be resolved soon
  • Kolkhorst – Hope that the lesson on just-in-time and just-in-case is learned, need to start building things on this continent
    • Current China issue is instructive about just-in-time, could’ve lost that lesson but they reminded us
  • West – Your company believes inflation will be about 5.2% at the end of this year?
    • Yes, and will come down over next few years
  • West – And the fed will tighten?
    • Yes, believe they are committed to it
  • Perry – Glad they are committed to it, they’re about a year late, means that cost of borrowing will go up; balance between the two aspects and no fixing without pain, is that fair?
    • That’s fair
    • Also on housing, new generation of owners will definitely be affected
    • Real question is how we drive housing supply up

 

James LeBas, Texas Association of Manufacturers

  • Inflation is an uncertainty in business with no payoff
  • business community is having to relearn how to navigate higher prices; can look to O&G industry as rising and falling prices are course of business
  • One TAM member produced a report on inflation’s effects, highlights rising household prices, shipping costs, diesel fuel prices, etc.
  • Manufacturers are dealing with inflation, meaning cost of supply, wages, etc. is going up
  • Inflation is not something manufacturers like, makes things hard to plan for & risk without a return

 

Geoffrey Tahuahua, Associated Builders & Contractors of Texas

  • ABCT uses two metrics: Construction Backlog Indicator and Construction Confidence Indicator
  • Backlog indicates there is work available, though saw some delays due to the pandemic
  • Confidence measures how confident companies are in certain factors, like supply costs, etc.
  • Different way to account for supply price increases, incl. passing prices to owner, and more commonly contingency
  • Also seeing advance deposits for specific materials subject to inflation
  • More must be done to address gap in skilled workers

 

Heston McBride, Texas Farm Bureau

  • Large increases in costs tied to fuel prices, energy prices also contribute to increases in supplies like fertilizer
  • Increases in prices affect margins and costs to consumers; will have a large negative impact on rural communities where agriculture supports the local economy and job market
  • Already seeing increased food prices, but farmers and ranchers do not receive similar increase in value when selling products at market
  • Kolkhorst – Hearing a lot about input cost increases like fertilizer, some of these ingredients come from other countries that are pinching us right now; seeing some producers deciding not to fertilize; what is driving the demand?
    • Coming from multiple directions, around 80% of fertilizer coming from Russia and China
  • Campbell – So you’re not recovering costs as much, not passing on these increased costs?
    • Demand is not there to support cost increases; doesn’t make financial sense to buy fertilizer at increased prices
  • Perry – Ag producers don’t determine their prices, federal gov subsidizes and set; not a free market for many reasons
  • Perry – Seeing issues with exporting manufacturing, people want the cheapest product as soon as possible; need to be independent of others

 

Don “Skeeter” Miller, Texas Restaurant Association

  • Labor is a huge issue, $15/hour is a nonissue, employees now making $20-$30/hour & overall down employees
  • Seeing supply side constraints on to-go items, lack of availability; had to raise prices on many items due to increase in supply prices
  • Whitmire – With all those costs you still can’t get in the restaurants
    • Still operating at only 50% capacity, reductions in staff, etc., lowered sales overall
  • Flour and wheat
  • Bettencourt – Heard that inflation will be down to 5% this year, you don’t see that happening do you?
    • Hope is a now a strategy, when prices rise they tend to stay high; don’t see supply prices coming down
  • Bettencourt – You would be ecstatically hopeful at 5%? Just unrealistic
    • I would be
  • Hinojosa – Many items are not available even when you get in the restaurant
    • Yes, in some cases where steak prices were too high, just eliminated the grill
  • Campbell – What can we do to help?
    • Many of the things you did last session were helpful
  • Perry – Asks after consumer spending trends
    • Eventually all the extra money that individuals have will be gone

 

Lisa Collier, Texas State Auditor’s Office

  • Provides written material on salary increase given by state agencies, trend information on salary schedules; seeing increases on all schedules
  • 10-year analysis of turnover in the state, has steadily increased over the last 10 years, 10-year high in 2021 of >20%
  • Art V has the highest turnover percentage, Art II agencies have the second highest
  • By industry type, criminal justice, social services, and custodial lead in turnover
  • Highest turnover rate occurs in salary groups making less than $40k/year
  • Huffman –

 

Lisa Collier, Texas State Auditor’s Office

  • Provides written material on salary increase given by state agencies, trend information on salary schedules; seeing increases on all schedules
  • 10-year analysis of turnover in the state, has steadily increased over the last 10 years, 10-year high in 2021 of >20%
  • Art V has the highest turnover percentage, Art II agencies have the second highest
  • By industry type, criminal justice, social services, and custodial lead in turnover
  • Highest turnover rate occurs in salary groups making less than $40k/year
  • Huffman – over the last decade, when we the last time we gave an across the board raise
    • 2016, a 2.5% increase to help cover increase to the pension contribution
  • Huffman – asked for examples about targeted increase
    • Classification C did have an increase, but A&B have not seen an increase since 2008
    • The highest turnover by far was juvenile correction
  • Huffman – what would an across the board raise for all employee cost?
    • A 1% increase would be about $100 million a year
  • Perry – asked about number of salaries making $125k-$150k and up?
    • Will get that to the committee
  • West – wants to see what it looks like if they did 5%, maybe target different categories
  • Nichols – a lot of turnover in categorized specialty, believes staff would recommended targeted supports for those if it is more than avg turnover

 

Sharon Schneider, Texas State Auditor’s Office

  • Resource witness with no testimony

 

Porter Wilson, Employees Retirement System Executive Director

  • Last time employee saw a cost-of-living adjustment was 2002
  • Reviews slides on ERS and services provided to retiree

 

Russia Divestiture: Examine and report on options for state asset owners to divest their positions in companies that invest in the Russian Federation.

 

Mike Reissig, Texas Treasury Safekeeping Trust Company

  • Work out of Comptroller’s Office
  • Reviewed portfolio for Russian investments, no direct investments and only $18.6 million in indirect exposure
  • Managers worked on divesting and reducing exposure, by March 31 indirect exposures was reduced by 96% only around $1.2 million
  • With narrow focus on state funds divesting from Russia and its impact on the economy would not be much
  • Huffman – Prompted members if they have individual questions they can pull up the witnesses to address
  • In other funds if they identity Russian investments can divest in a few ways, continued to walk through slides handed to the committee
  • Potential legislation requirement could be some type of reporting requirement, require a check on entity that does business with Russia, and monitor direct and indirect investments – reporting could be done annually with a Sunset date
  • Huffman – Are you even able to do business with Russian companies?
    • Yes and no, market not fully open like before invasion, easier if you are in Russia
  • Nichols – Would like to have conversations overall on how they want to address divest, do they continue divest from non-friendlies
  • Bettencourt – Need to get out of any Russian investment, period
  • Perry – Discusses fiduciary responsibilities, have to have smart policies that allow divesture to occur without abdicating fiduciary responsibilities
  • Bettencourt – Divestment will come at reduction of asset, reiterates earlier point
  • Campbell – Asked about investment in China?
    • Does not have but will provide later

 

State Pension Reforms: Monitor the implementation of recent statewide pension reforms to the Employees Retirement System of Texas and the Teacher Retirement System of Texas.

 

Brian Guthrie, Teacher Retirement System Executive Director

  • Pension reform overview from 2019 session
  • Increase of contributions making plan actuarily sound
  • Had huge return last year which helped the plan, currently 4 years ahead of schedule to reach goals
  • Found 8% return assumption was too high and unsustainable for long term, so lowered return assumption to 7.5%
  • Board is now recommending they lower again from 7.5% to 7%
  • They look at returns over a 10 year and 30 year horizon, and they look at what peers are doing and they have lowered return assumptions across the board of other funds across the nation
  • Reviewed many of the factors going into this assumption and various impacts, they board has not made the decision yet
  • Huffman – as you are discussing a COLA, do any bring out of actuarial soundness?
    • No
  • Can put forward a financially sound pension system, when assumption is 7% it takes long term risk off the table
  • Perry – Asked about gains? What do you want to use deferred gain for?
    • They are being invested, but not proposed using deferred gain for a COLA
  • Perry – Wants to know if models were run?
    • Models ran based on proposal from last session
  • Perry – Said conversation they provided was not fair, teachers thought it was something real they were offering
    • Provides details on information that prompted their discussion
    • There are several ways to pay for a benefit enhancement
  • Campbell and witness says economic outlook may be stronger and not need to lower, director said may need to lower if they don’t do it now

 

Porter Wilson, Employees Retirement System Executive Director

  • Reviewed fund history
  • Provided report card – normal costs met during last legislative session but not actuarily sound and now all is reversed
  • Fund should be actuarially sound by 2024 and 100% funded by 2054
  • $510m legacy payment saving substantial
  • Next chart is the report card speaking to funding guidelines adopted by the board; expecting to get fund actuarially sound by 2024
  • Significant effort to get new benefit rolled out, new complexity with two different contribution amounts for employees @6% and 9%
  • On schedule and see no problems being able to go live on Sept. 1
  • May be coming to you next session with fixes
  • Law Enforcement & Custodial Supplemental and the JRS II funds still need some attention, have unfunded liability
  • Huffman – Can you explain the statutory provisions that automatically grants COLAs?
    • In 2013, bill created Group 3 and incl. a one-time COLA of 3% or $100 monthly for anyone who had been retired for 20 years
    • 93% of retirees that would get this would get less than $100
  • Huffman – Only kicks in if fund is actuarially sound?
    • Yes, not only when it is paid but also after it is paid, costs roughly $100m

 

Public Testimony

Janice Zittleman, Retiree

  • Retired after 30 years as a state employee, enjoyed the work, but pay levels were low and often entry-level positions paid more
  • Monthly annuity is higher than average, but feeling the pinch
  • Legislature has balanced the budget on the backs of state employees, turnover will probably only continue and get worse

 

Fred Heldenfels, Precast Concrete Manufacturers Association of Texas

  • Appreciates comments on rising costs, supply issues, etc.; issues are exacerbated in the precast concrete industry due to reliance on specialty materials
  • Transportation costs have also increased about 30-40%, importing cement is challenging
  • Nichols – In your letter, you mention projects bid out two or more years ago are still seeing supply issues?
    • Yes, have a project that was bid in 2017, but no materials; jobs this old have been severely impacted
  • Nichols – Usually quotes were good for about a year, never guaranteed anyone 2-3 years out
  • Nichols – Working with TxDOT?
    • TxDOT released a guidance memo per their policies, made it clear that they will do something to compensate for cost overruns

 

Joanne Day, DSHS Employee, Self

  • Have struggled for some time with stagnant wages, leading cause for increase in turnover
  • Solution to inflation, turnover, and retention is to invest some of the estimated $12b available

 

Mary Whitmire, Retired Teacher & school Administrator

  • One of the individuals that has not gotten a COLA despite being retired for 15 years
  • Meaningful COLA is needed, need to maintain actuarial soundness, pursue wise investments, and allow fund to grow

 

William Rogers, Texas Public Employees Association

  • Presents survey info from state employees on how they have been impacted by inflation, many are unable to make rent, pay for necessities, etc.
  • Buying power of pension dollars are way below where it was when people first qualified

 

Steven Gassenberger, Reason Foundation

  • TRS has outdated assumptions about assumed rate of return, has impacts on frequency of COLAs, also a Russian divestment issue

 

Dan Maxwell, Retiree, Texas Public Employees Association

  • Inflation impacts almost everyone, retirees last got a COLA in 2002, inflation has compounded to 60% since that last adjustment

 

Eric McKnight, Self

  • Rising prices means lowered purchasing power, difficult for retirees on a fixed income, meaningful COLA would help all Texas retired educators

 

Tim Lee, Self

  • Reduction in buying power for retirees on fixed incomes is very significant

 

Louise Watkins, Self

  • Should consider an across the board COLA for teachers

 

Individual

  • Hope legislature will consider a reasonable and substantial COLA for educators

 

Debby Pepper, TSTA Retired

  • Have seen zero COLA increases in 20 years, should consider broad COLA

 

Tyler Sheldon, Texas State Employees Union

  • Should move away from if there will be a pay raise and move to when
  • Entire workforce is seeing higher costs, will need to keep targeting issues as they arise; if not indexed will keep having issues like we do now

 

Jeff Ormsby, AFSCME

  • Should consider all employees that work in prisons
  • Huffman – Very aware of issues faced by employees in prisons & the important work they do

 

Luther Elmore, AFSCME

  • Current inflation rate is making it harder for retirees on fixed incomes; overdue for a 13th check for ERS employees and a broad COLA

 

Holly Eaton, Texas Classroom Teachers Association

  • Teacher attrition rates are climbing, teacher salaries are not keeping pace, remains essentially unchanged over the last decade due to inflation
  • Should consider increased ISD funding for salaries that meets national average and accounts for inflation
  • Grateful for the $435m for TRS-ActiveCare, requesting COLA for retired teachers

 

Monty Exeter, Association of Texas Professional Educators

  • Need for COLA is not just from inflation, needed to respond to structural problem in the system
  • Kolkhorst – If we were able to do one-time payments continually, isn’t it better than a 1% COLA? Never going to be for a continuous COLA, have seen it destroy other pension systems
    • Have been very appreciative of the 13th checks, has a large impact in particular year; usually only happen once in a biennium though, so cut roughly in half and much closer to the COLA
    • Agree that it makes no sense to put policy in place that will run TRS into the ground, but there are ways to put sound policy with triggers into place
  • Kolkhorst – There were decisions made in 1995 that really did damage to the fund
    • Constitutional provisions were helpful, have a 10% cap but also a 6% floor; number of state pension systems failed when they weren’t funded
  • Huffman – Sent $435m to ActiveCare to avoid premiums, etc., getting close to $1b in support

 

Craig Campbell, Austin Retired Teachers Associations

  • Retirees need COLAs, used to pass regularly, but have not had many in the last 20 years; need to support teachers with COLA

 

Lydia Carillo Valdez, Retired Teacher, Texas AFT

  • Appreciates work done by the committee to support teachers