Abbott calls for stricter oversight of Texas public pensions
June 26, 2007
Eighty-two public pensions in Texas have unfunded liabilities totaling $23 billion, Texas Attorney General Greg Abbott said Monday, as he called for stricter oversight of the funds that provide retirement benefits to more than two million Texans.
Written by Staff, Austin American-Statesman
Eighty-two public pensions in Texas have unfunded liabilities totaling $23 billion, Texas Attorney General Greg Abbott said Monday, as he called for stricter oversight of the funds that provide retirement benefits to more than two million Texans.
He listed the Austin Employees Retirement System and the Austin Fire Fighters Relief and Retirement Fund among the 17 at highest risk, because it would take 40 years for those funds to pay off their unfunded liabilities — the gap between their assets and their obligations to retirees.
The Austin employees fund has a $395 million unfunded liability. The firefighters fund has an $86 million gap.
Although the state's public pension system overall appears to be stable, Abbott said that many funds have not been able to close that gap, despite several years of a strong stock market.
Abbott said factors beyond investment shortfalls can contribute to the gap, including board members' conflict of interests that can "impair decision-making" about investments and unrealistic actuarial assumptions.
For example, Abbott said, he had been given information about investment firms that had offered jobs to pension fund board members, which could affect their judgment about where to invest the funds' money.
In other cases, he said, boards had adopted unrealistic assumptions about the return the fund could make on investments in order to justify raising benefits. When the actual return was lower, the fund faced a bigger unfunded liability.Abbott didn't provide details for either example.
Abbott received information from the pension board on 96 funds. The 82 with liabilities exceeding their assets cover 1.8 million people.
The highest-risk funds, he said, include the Judicial Retirement System of Texas, with an unfunded liability of more than $5 million for each active member, and the El Paso Firemen's Pension Fund, whose unfunded liability works out to more than $200,000 per member.
The state's biggest public pension, the Teacher Retirement System of Texas, has a $13 billion unfunded liability, but lawmakers increased the state's contribution this year in hopes of helping to close the gap.
Abbott laid out a series of measures to improve oversight of the funds. They included:
Ban pension fund trustees and managers from working for companies that did business with the board for a certain period of time after they leave.
Require actuaries who work with public pensions to register with the Pension Review Board, which in turn should develop standards to discourage inflated or unrealistic assumptions.
Require funds to have at least one board member with investment expertise.
Use court orders and subpoenas, if necessary, to force funds to file annual reports, as required by state law.
Highest-risk funds
Fund Unfunded liability Unfunded liability/member
Teacher Retirement System of Texas $13.9 billion $15,019.70
Employees Retirement System of Texas $1.1 billion $8,341.30
Austin Employees Retirement System $395.4 million $51,765.25
Fort Worth Employees Retirement Fund $411.3 million $71,177
Austin Fire Fighters Relief and Retirement Fund $86.5 million $87.448
El Paso City Employees Pension Fund $97.4 million $24,397.40
El Paso Police Pension Fund $158.5 million $145,860.02
Irving Firemen's Relief and Retirement Fund $32.7 million $105,935.37
University Health System Pension Plan $34.9 million $10,650.67
Longview Firemen's Relief and Retirement Fund $16.9 million $106.175.91
Texas City Firemen's Relief and Retirement Fund $6.7 million $112,972.31
Greenville Firemen's Relief and Retirement Fund $7.2 million $112,972.31
Lufkin Firemen's Relief and Retirement Fund $6.8 million $93,782.74
Conroe Fire Fighters Retirement Fund $4.9 million $70,951.88
University Park Firemen's Relief and Retirement Fund $5.9 million $154.734.11
Waxahachie Firemen's Relief and Retirement Fund $3.7 million $85,602.98
Brownwood Firemen's Relief and Retirement Fund $2.6 million $91,245.14
Source: Texas attorney general's office
Fair Use Notice
This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a "fair use" of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond "fair use", you must obtain permission from the copyright owner.