Senator Eliot Shapleigh - El Paso, Texas

The Legislature's fix of the state's largest pension fund was going to take "a little bit of pain on everyone's part," Sen. Robert Duncan, R-Lubbock, told fellow senators last week.

By the time the session ended Monday, though, only one group got hurt: future Texas teachers and other public school employees, who will get fewer retirement benefits than current employees do.

The other part of shoring up the Teacher Retirement System of Texas, an extra $100 million from the state, was stripped from the state budget over the weekend. The money would have increased the state's bare-bones contribution to the TRS, which hasn't increased since 1995.

The lack of extra money this session means lawmakers face an even bigger tab in the 2007 session if they want to authorize a second increase in benefits for retired educators sometime this decade.

Even with the retirement cuts for teachers hired in 2007 and later, the state will have to kick in at least an extra $500 million in the next session to give retirees any hope of a benefits increase in 2008 or 2009.

Retiree benefits were last increased in 2001. Since then, inflation, rising health care premiums — next year's premiums will rise by about 7 percent — and out-of-pocket medical costs have shrunk retirees' buying power.

The TRS pays retirement benefits to about 240,000 people.

The budget defeat is "disappointing," said Tim Lee, executive director of the Texas Retired Teachers Association in Austin. "The problem will not resolve itself by reducing benefits. It will take a financial dedication from the state to make sure the system is not only solvent but actuarially sound for retirees today and future retirees."

If a state pension fund doesn't have enough assets to pay current and future members during the next 31 years, Texas can't increase benefits. The $91 billion pension fund has $11 billion less than it needs to pay promised benefits.

Investment returns have averaged 10 percent a year during the past decade. The state's contribution to the system, though, has been 6 percent of employee pay since 1995, when lawmakers cut state money by 18 percent.

"Because the Legislature has shortchanged the pension fund for more than 10 years and will continue to do so, retired teachers have no hope of an overdue cost-of-living increase, even as the Legislature hikes their premiums again for health care coverage," John Cole, president of the Texas Federation of Teachers, said in a statement.

Key lawmakers in pension reform, including Duncan and Rep. Craig Eiland, D-Galveston, had hoped that the state would raise its contribution to 6.22 percent.

A spokeswoman for Duncan said he doesn't know how the $100 million he wanted put into the pension fund was shifted to other programs.

Duncan and Eiland won approval for pension-reform legislation that curbs retirement benefits for public school employees hired after Sept. 1, 2007. The measure, now awaiting Gov. Rick Perry's signature into law, or veto, restricts the ability to retire before age 60 with full benefits.

The measure also discourages school districts from rehiring retired workers, whose health care costs are covered by the retirement fund. And it imposes new rules to keep teachers and other employees working longer.

But by itself, the plan falls about $500 million short of making the TRS actuarially sound.