Rainy day fund might help retired teachers
House’s tapping of $213M is at odds with Senate’s approach.
The Texas House on Tuesday tentatively approved withdrawing $213 million over the next two years from the state’s rainy day fund to lower health insurance costs for retired teachers.
The measure, which is awaiting final approval after a 130-10 vote Tuesday, sets up a showdown with the Senate over how to pay for a boost to the beleaguered Teacher Retirement System.
In January, many retired teachers, particularly those under age 65, will see premiums and deductibles that are 10 times higher than what they’re paying now. The Legislature during the regular session that ended in May approved the cost hikes and injected more money into the
retirement system to partially fill a $1 billion funding hole.
After retirees flooded lawmakers’ phone lines over the past month or so, Gov. Greg Abbott asked lawmakers to address the Teacher Retirement System, an issue that wasn’t included in Abbott’s list of special session priorities in June.
“This vote was a smart and appropriate use of about 2 percent of the $11 billion that is projected to be in the state’s rainy day fund in the next budget cycle,” House Speaker Joe Straus, R-SanAntonio, said in a statement Tuesday. “It will keep the rainy day fund balance at a historically high level while helping Texans who have committed their lives to the education of our children.”
House Bill 20 by Rep. Trent Ashby, R-Lufkin, would lower premiums and
deductibles that are slated to go into effect in January. For retirees under 65, annual deductibles for individuals would be cut in half to $1,500. Premiums for retir- ees with spouses on their plans would decrease by $100 a month. The bill also would reduce out-of-pocket expenses and premiums for retirees with dependent chil- dren, including those who are disabled.
The Senate has passed Sen- ate Bill 19, which would inject $212 million into the retirement system over the next two years.
The main difference in both pieces of legislation — and what could derail HB 20 — is the method of financing. The Senate, which is less inclined to use the state’s $10 billion rainy day fund, would pay for SB 19 by delaying payments to Medicaid managed-care organizations in the upcoming budget cycle to the following budget cycle. Senate Finance Committee Chairwoman Jane Nelson, R-Flower Mound, has said using the fund would not be a permanent solution.
Rep. Bill Zedler, R-Arlington, said Tuesday that he supports the Senate’s method and that use of the rainy day fund, also called the Economic Stabilization Fund, should be for budget shortfalls.
“It should be done for onetime expenses,” said Zedler, a member of the conservative Freedom Caucus. Eight other members of the caucus voted against the bill Tuesday.
Rep. Mike Schofield, R-Katy, who ultimately voted for the bill, attempted to file an amendment to use the Medicaid deferral to pay for the bill, saying that the Senate would not approve tapping the rainy day fund.
Ashby said that the fund is growing and using it in this instance is more fiscally responsible.
“Let’s pay cash out of the ESF rather than incur more debt ... by delaying a payment,” Ashby said. “Again, maybe it’s just my country common sense: If we have money in the bank, let’s pay for it.”
Ashby added that Medicaid is already underfunded by $1 billion and that delaying payments to providers could hurt patient care.
Ashby said that he would be willing to consider other methods of financing the bill and wants a permanent solution in the long run.
Even with the infusion of money envisioned in the House and Senate versions, the system is still expected to face a $500 million to $700 million shortfall in the 202021 biennium.
“We have this one moment in time that we can try to get something done right now, but it’s going to lead us into a bigger discussion in the next Legislature that this health care program needs an improved funding source,” said Tim Lee, executive director of the Texas Retired Teachers Association.
Also Tuesday, the House in a 139-2 vote tentatively approved HB 80, which would increase pensions by up to $100 a month for teachers who retired between Aug. 31, 2004, and Aug. 31, 2015. The last pension cost-of-living increase was in 2013 when only teachers who retired before Aug. 31, 2004, qualified. Most Texas teachers don’t receive Social Security benefits because most school districts don’t pay into Social Security.
State law, however, prohibits pension increases until the retirement system pays off some of its liabilities and becomes actuarially sound.