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CoffeeCopsAG warns of $20 billion threat to
pension funds
By R.G. Ratcliffe - The Houston Chronicle
AUSTIN — Texas Attorney General Greg Abbott warned
Wednesday that the nation's current financial crisis makes a
$20 billion unfunded liability in the state and local public pension
funds a financial threat to public employees and taxpayers.
But some of the funds said Abbott is overstating the importance
of unfunded liabilities in judging the soundness of a pension.
Abbott's warning was in keeping with one he issued last year calling
for greater regulation and transparency of the state's pension funds.
He also wants his office to have some oversight authority,
which it now lacks. Abbott on Wednesday said his call has a
fresh importance “in the wake of recent instability in the country's
financial markets.”
Public pensions are funded through contributions from the employees
and the government they work for and from the gains of investments
in bonds and the stock market.
Abbott said there are 80 public pensions in Texas that have $20 billion
in unfunded liabilities. That means the annual contribution rate for
employees and the governments is less than what would be required
to pay out the pension to every person covered over a 30-year period.
“Improperly managed public pensions pose a financial threat to public
employees and the taxpayers alike,” Abbott said in a news release
announcing a Web site dedicated to listing the unfunded liabilities of
public pensions: public pensions
The Houston firefighters' pension has an unfunded liability of $346 million.
The municipal employees pension is underfunded by $934 million.
And the city police pension fund had an unfunded liability of
$852 million, all according to Abbott's data.
Craig Mason, the chief of pensions for the city of Houston,
said it's “not fair” to look only at unfunded liabilities to judge
a pension's health: “It's only one element of the actuarial process.”
The municipal employee and police pension funds will have greater
solvency in the future because of cuts in future benefits and because
of increased city contributions to the police fund, Mason said.
He said the current instability in the stock market does not matter
in the short run because investment gains and losses are averaged
out over five years. “A short-term swing in the markets is not
something to worry about,” Mason said.
The San Antonio Fire and Police Pension Fund
has an unfunded liability of $204 million, Abbott said.
A call to the fund for comment
was not returned.
Two of the state's largest pensions are the Teacher Retirement
System of Texas, with $12.5 billion unfunded liability, and the
Employees Retirement System of Texas, with a $1 billion
unfunded liability.
But a financial review of the teacher's system put out by an
independent auditor last August shows the unfunded liability
is not that high because the pension has $8.7 billion in deferred
investment gains that are not included in the accounting.
