Bill

SB 321

87(R) - 2021
Senate Finance
House Appropriations
Senate Finance
House Appropriations

Contact the Author

Joan Huffman

Phone:

512-463-0117

Capitol Office:

1E.15

Email:

Vote Recommendation

Neutral
  • Neutral
  • Neutral
  • Neutral
  • Neutral
  • Neutral

Author(s)

Joan Huffman

Co-Author(s)

Paul Bettencourt
Jane Nelson
Drew Springer

Sponsor(s)

Greg Bonnen

Bill Caption

Relating to contributions to, benefits from, and the administration of the Employees Retirement System of Texas.

Fiscal Notes

Estimated Two¬≠year Net Impact to General Revenue Related Funds for SB321, As Engrossed : a negative impact of ($678,300,000) through the biennium ending August 31, 2023.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.  ERS is required to implement a provision of this Act only if the legislature appropriates money specifically for that purpose.  If the legislature does not appropriate money specifically for that purpose, ERS may, but is not required to, implement a provision of this Act using other appropriations available for that purpose.



Bill Analysis

SB 321 would establish a new cash balance retirement plan for new state employees starting on or after September 1, 2022. The bill would also require the state to make annual amortization payments to the ERS trust fund in order to start paying down the existing unfunded liability.

Vote Recommendation Notes

The Employees Retirement System is in deep trouble because of the current and growing unfunded liability. This liability was created by virtue of having a defined benefit system in which retirees are promised certain benefits based on projected rates of return on investments. Unfortunately, returns over time have not lived up to the projections, creating the unfunded liability. 

Texas has an obligation to keep its promise to ERS members so the unfunded liability issue must be addressed.

Texas also has an obligation to taxpayers to stop making promises to state employees that the state can't keep without fleecing taxpayers to fund them. To achieve this, the system must move fully to a defined contribution system in which the state and the state employees make contributions at a defined rate and the benefits are based on actual rates of return rather than pie-in-the-sky projected rates of return. 

SB 321 proposes enormous amortization payments to the ERS in order to deal with the unfunded liability. The bill also establishes a cash balance system for state employees beginning in 2022. According to the United States Department of Labor, a cash benefit system is a type of defined benefit system, although it has some of the characteristics of a defined contribution system. At best this would be a hybrid of a defined benefit/contribution plan which falls short of what is needed which is a clear and unambiguous defined contribution plan to prevent future unfunded liabilities. 

The proposed cash balance system appears to at least be a modest step in the right direction, therefore Texas Action remains neutral on SB 321.

Contact the Author

Joan Huffman

Phone:

512-463-0117

Capitol Office:

1E.15

Email: