Posted on 6/2/17; updated 6/15/17
An acrimonious regular session of the Texas Legislature ended Memorial Day, with lawmakers knowing they might meet again soon in a special session, topics to be determined by Gov. Greg Abbott. The State’s tight fiscal outlook made serious consideration of a meaningful pay raise for active state employees difficult, but the active and retired state workforce did experience success in the form of full funding for health insurance and the continuance of increased contributions to the ERS pension fund. The successful passage of the ERS Sunset bill without detrimental changes to ERS programs or processes is also a victory.
Although fierce debates about sanctuary cities and “bathroom bills” dominated the session, lawmakers also passed the budget bill they are constitutionally required to pass, as well as the Employees Retirement System (ERS) Sunset bill. Both bills have been sent to the governor, who has until June 18 to sign or veto legislation. He may also veto line items in the budget. (Abbott signed the budget June 12.)
A Closer Look at the Budget
The session began with the State Comptroller’s Biennial Revenue Estimate, in which Comptroller Glenn Hegar projected lawmakers had $104.9 billion in General Revenue at their discretion. The FY 2018-2019 budget passed by the Legislature spends $107.7 billion in General Revenue and Economic Stabilization Fund (ESF) dollars.
The decision to tap into the ESF, commonly called the Rainy Day Fund, represents a compromise between the House and Senate and partially makes up the revenue shortfall. The rest is covered by a deferred $1.8 billion payment to the state’s transportation fund. Rainy Day dollars ($990 million) will be used for one-time expenses, such as repairs to state hospitals, state-supported living centers (SSLCs) and the Alamo.
The budget contains good news and bad news for active and retired state employees. The bad news first: The budget does not contain an across-the-board pay raise or merit pay increase for active state employees, despite TPEA’s advocacy for a salary increase to address a 17 percent turnover rate across state government. Given the realities of the state’s fiscal outlook—with lawmakers cutting the budget every way they could and agencies under a hiring freeze—this is not surprising.
The good news, however, is that the state’s contributions to the ERS pension fund and active and retired state employee health insurance remained intact despite budgetary constraints. The state will continue to contribute 9.5 percent of payroll to the ERS pension fund, and agencies will continue contributing 0.5 percent of payroll. The active employee contribution will also remain at 9.5 percent.
These contribution levels, implemented by the 84th Legislature in 2015, have reduced the fund’s unfunded liability period from infinite to 35 years, placing the fund back on the path to actuarial soundness. TPEA had strongly advocated for maintaining these rates. Actuarial soundness is defined in statute as a 31-year funding period. The fund must be at and able to maintain actuarial soundness before there can be any consideration of a retiree benefit enhancement, such as a 13th check. (An additional $92 million would be required to bring the fund to actuarial soundness.)
On the health care front, the state will continue contributing 100 percent of active and retired employees’ health insurance premiums and 50 percent of spousal and dependent premiums, with no change to benefit design. HealthSelect plan participants can anticipate premium increases of no more than 1 percent for spousal and dependent coverage but no pocketbook hit for the employee- or retiree-only premium.
TPEA’s priority was to maintain the current benefit design and contribution for active and retired state employees. Although this might feel like status quo, active and retired employee health care is never a given in the state budget process, so this is an excellent outcome given lawmakers’ tight budgetary restraints. We support the cost-containment measures outlined in the budget that make it possible for the State to continue its contributions to active and retired employee health care and maintain current benefits. (Learn more about these measures here.)
A special session is almost a given because Sunset bills extending the life of five state agencies, including the Texas Medical Board, did not pass. Without action, these agencies must begin shutting down. The final weekend of the regular session featured dueling House and Senate press conferences over which chamber was to blame.
Even before sine die, interested parties and some lawmakers were urging the governor to include hot-button issues in his call for a special session. The governor has made it clear that he alone makes the call on the timing and content of a special session. TPEA is closely monitoring the situation. This Legislative Reference Library web page answers frequently asked questions about special sessions. The governor may call as many special sessions, not to exceed 30 days in length, as he likes. He may include as many or as few topics on the call as he wishes, and he may add them as the special session progress.
Stay tuned to TPEA communications for updates.
Note: On June 6, Abbott has called a special session to begin July 18.