The Texas House and Senate approved a plan Sunday to make the Teacher Retirement System pension fund financially healthy and give retired teachers a one-time extra monthly payment.
The Texas House voted 145-1 and the Senate voted 31-0 to approve the final version of Senate Bill 12, authored by state Sen. Joan Huffman, R-Houston, and sponsored by state Rep. Greg Bonnen, R-Friendswood. Using $1.1 billion from the state savings account over the next two years, SB 12 would shore up the pension fund by gradually increasing state, school district and teacher contributions over the next six years and give retired teachers a one-time "13th check" of $2,000.
The bill now goes to Gov. Greg Abbott for a signature.
"For the first time in legislative history, we are successfully taking the fiscally responsible approach in providing our well-deserved retirees with a one-time supplemental payment and paying for it upfront," Huffman said.
Retired teachers have long been forced to live on a fixed income, even as the cost of living in Texas is rising quickly. Most do not participate in Social Security, meaning the TRS pension is their only source of income after they retire. They often report needing to choose among large, important expenses such as medical bills and groceries.
Under current law, teachers pay 7.7% of their salaries into the pension fund, while school districts pay 1.5% of teacher payroll. That combined funding is dead last in the country among teacher plans. Under SB 12, teachers and districts would start to increase their contributions in 2022. Teachers would pay 8.25% by 2024, and districts would pay 2% by 2025.
The state would gradually increase its contribution of total teacher payroll from 6.8% to 8.25% between 2020 and 2024. For the next two years, the increase in the state's contribution plus the one-time check for retired teachers would cost $1.1 billion. All of that money would come from the state's savings account, including $589 million for the one-time check.
The money was included in the supplemental budget, Senate Bill 500, which lawmakers in both chambers also approved Sunday.
Lawmakers are not allowed to approve an increase in retired teachers' monthly payments until the TRS is "actuarily sound," meaning it has enough to pay off its debts in less than 31 years. This would make it actuarily sound immediately.
But the bill would not provide automatic cost-of-living increases for retirees, putting the TRS at odds with most other retirement systems in the country. Instead, it would give retirees a one-time additional check beyond the monthly amount they receive. The Senate had proposed $500 and the House proposed $2,400; they decided on $2,000.