The 86th Legislative Session is underway. For the next four months, legislators will consider thousands of bills and resolutions, some of which have a direct impact on public employees and retirees. Each week during the session you will receive updates on legislation of specific interest that affect employee compensation, health care benefits, and pensions. These updates will cover the state budget and specific bills that address these issues, such as legislation changing the state contribution rate to the ERS Retirement Fund or affecting state salary levels. You may also see discussion of other issues in which TPEA has historically been involved, such as dues check-off legislation and the composition and election of the ERS Board of Trustees. If you have any question or comments about this information, please do not hesitate to shoot us an email or contact our office. We appreciate everything you do for the people of this state!

Here are some of the bills of interest that TPEA is tracking for you.

HB 1 by Rep. John Zerwas (R-Houston)

maintains the 9.5% state contribution rate to the ERS Retirement Trust and the additional 0.5% contribution by general state agencies that the Legislature adopted in 2017. This brings the total state contribution to 10%, the maximum allowable rate under Art. 16, §67, Texas Constitution. It likewise maintains health benefit contribution rates for state employees at their current levels and aims to pay premium increases out of cost savings ERS has achieved in health plan contracts. HB 1 also provides for an increase of $4 million in funding for health benefit contributions for local community supervision and correction department employees, retirees, and dependents who also participate in the state's Group Benefits Program. Finally, the bill funds 214,038 and 214,427 FTE positions in 2020 and 2021 respectively. The 2021 level represents a decrease of 2,244 positions from FY 2019 budgeted levels, which the LBB states is related to aligning FTE position caps with funding levels and 2018 actual position levels

HJR 10 by Rep. Giovanni Capriglione (R-Southlake)

establishes the Texas Legacy Fund (TLF) and Texas Legacy Distribution Fund (TDLF) to finance certain infrastructure and long-term obligations of the state, including unfunded liabilities in the ERS Retirement Trust Fund. It requires the Comptroller to transfer one-half of any unencumbered balances at the end of a biennium to the TLF (the other half goes to the Economic Stabilization Fund, or "Rainy Day Fund"). In a year in which the Rainy Day Fund is at or above the limit set by the Legislature, the Comptroller shall allocate that share to the TLF. To capitalize the TLF, HJR 10 directs the Comptroller to transfer $3.5 billion from the Rainy Day Fund. The Comptroller will invest the TLF as directed by law, and all interest and investment earnings will go into the TDLF. The Legislature may then appropriate money from the TDLF for only four purposes: state general obligation debt retirement, unfunded liabilities in ERS and TRS, infrastructure other than higher education or transportation, and other long-term obligations approved by a vote of 2/3 of the members of each house. If passed by a 2/3 vote of the Legislature and approved by the voters at the November 5, 2019 election, HUR 10 would go into effect on January 1, 2020.

HJR 10 mirrors a proposal made by Comptroller Glenn Hegar to establish a constitutionally dedicated fund to address Texas' long-term debt and other infrastructure needs. It has the potential to produce significant biennial payments to restore the ERS Retirement Trust to actuarial soundness. It also specifically overrides the 10% constitutional limit on the state's contribution to ERS, which, although ambiguous, can restrain legislative efforts to shore up the trust more quickly. It is heartening to see the Comptroller and Legislature addressing the long-term needs of state employees, and we applaud their efforts.

HB 596 by Rep. Ana Hernandez (D-Houston)

makes a slight change with respect to the elected members of the ERS board of trustees. Currently, to be eligible for election to the board, a person must be an ERS member and hold a position that is included in the employee class of membership and not with an agency department with which another trustee holds a position. HB 596 amends the eligibility standard to allow (but not mandate) that one of the elected members can be a retiree.

HB 2414 by Rep. Philip Cortez (D-San Antonio) 

makes several changes to Chapter 609, Government Code, pertaining to the participation of state employees in a default investment product under a voluntary deferred compensation plan. Under current law, an employee must affirmatively opt out of participating in a 401(k) plan. HB 2414 reverses the process and allows an employee to elect to participate. In order to carry out this election, the employee must affirmatively contract for and consent to participate in the plan. When a new employee come on board, a state agency that participates in a 401(k) plan must inform the employee of the option to enroll and their right not to participate. This changes the current process under which the agency informs the new employee of their automatic enrollment and right to opt out. An employee may continue to authorize a payroll deduction for the employee's contribution to the plan, but the bill makes it clear that no deduction may be made without the employee's written authorization.

SJR 55 by Senator Charles Perry (R-Lubbock)  

is a proposed constitutional amendment that seeks to remedy the current unfunded actuarial liabilities in the Employees Retirement System and Teachers Retirement System. SJR 55 would dedicate 50% of the amount by which the unencumbered balance of the Economic Stabilization Fund (ESF, or "Rainy Day Fund") on the first day of each biennium exceeds 7.5% of the amount of money available for general purpose spending during that biennium. The Comptroller must determine the amount of the "state retirement systems stabilization set-aside" for that biennium by January 1 of each even-numbered year and transfer money to the fund. The Comptroller does not have to make or may reduce the amount a transfer if the comptroller determines that the systems are fully funded, or if, after consulting with the boards of trustees of both systems, determines that the full amount available for transfer exceeds the amount required to fully fund the systems. SJR 55 specifies that a transfer of funds under this provision does not count against the state's contribution limit (currently 10%). 

SJR 60 and SB 1862 by Rep. Philip Cortez (D-San Antonio) 

is legislation to raise both the maximum and current state contribution to ERS to 11%. SJR 60 would raise the maximum contribution from 10% to 11% (TRS stays at 10%), while SB 1862 raises the current statutory ERS contribution rate from 7.4% to 11%.