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Otto Promises to Fund Health Care for Retired Teachers

State Rep. John Otto, the head of the House budget-writing committee, pledged Wednesday to work to fully fund a nearly broke health care program for retired Texas teachers.

Rep. John Otto R-Dayton, chairman of the House Appropriations Committee, during Tribune Conversation event on February 12th, 2015

Saying a nearly broke state health care program for retired Texas teachers is “too important an issue to leave unaddressed,” the head of the House budget-writing committee pledged Wednesday to work to fully fund the program. 

“I want to commit to you today that the House will fund our obligations to our retired teachers," state Rep. John Otto, R-Dayton, said following a meeting of the House Appropriations Committee, which he chairs.

Without action from lawmakers, the Teacher Retirement System of Texas expects its health insurance program – TRS-Care – to run out of money during the 2016 fiscal year, with a $768 million shortfall by 2017. A cash infusion from the Legislature would prevent the retirement system from hiking premiums for the fund’s more than 233,000 retirees and their dependents, or cutting their benefits – its two other main options for keeping the fund solvent.

Following Otto’s announcement, other Texas lawmakers voiced their support. 

“Texas teachers are a large part of molding the Texas leaders of tomorrow, and many teachers and retirees have expressed their concerns on this matter,” state Rep. Dan Flynn, R-Canton, chairman of the House Pensions Committee, said in a statement.

House Speaker Joe Straus, R-San Antonio, tweeted that the “House appreciates retired educators.”

Texas teacher groups also welcomed the announcement.

“We’re very happy to hear that,” said Clay Robison, spokesman for the Texas State Teachers Association. “These are people on limited income who have spent their careers educating school children – one of the most important jobs in the state.”

Robison’s group also wants lawmakers to increase the state’s contribution to health care premiums for active teachers. Texas has kept its contribution at $75 per month since 2002, as premiums have more than doubled.

“That’s basically cutting into their paychecks because they haven’t been getting raises,” he said. 

In 2013, retiree premiums made up about 36 percent of TRS-Care revenue, according to Legislative Budget Board estimates, while the state chipped in 24 percent. Active teachers and school districts were the next biggest contributors, followed by federal subsidies and investment income. 

Why is the program so troubled? That’s largely due to soaring health care costs and lawmakers’ piecemeal approach to funding a system that experts have long considered unsustainable. 

Before 1986, Texas had no health insurance program for retired teachers. When lawmakers created the program, they expected its initial funding would last until 1995 – long enough to design a more sustainable model, the retirement system says. But lawmakers never did that, leaving the agency to occasionally request more funding to keep the program solvent – as it is doing now.

“TRS-Care is in a crisis moment,” Tim Lee, executive director of the Texas Retired Teachers Association, said Wednesday in a statement cheering Otto’s announcement.

If lawmakers simply choose to tap the general fund to plug the short-term budget gap without making structural changes, the fund would still be short about $1 billion next biennium, Brian Guthrie, executive director of the Teacher Retirement System of Texas, told the Senate Finance Committee earlier this month.

Several senators at that hearing expressed support for keeping the fund afloat.

“This is an emergency right now, so they need to address this," Robison said. "And then longer term, yes, they need to see a way for making it something retirees can continue – and not go from crisis to crisis.”

Morgan Smith contributed to this report.

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