Texas teachers who retired in last 19 years may get first cost of living increase – ever

AUSTIN — Retired teachers in Texas, most of whom have never received any increase in monthly checks, would receive a one-time cost of living adjustment — and possibly further bumps, later this decade — under legislation that advanced in the House on Friday.

Teachers and other former public school employees who retired in the last 19 years have never received cost of living increases. Occasionally, over the past two decades, lawmakers granted one-time payments called “13th checks.”

State leaders’ alarm about teachers fleeing the profession and Texas’ huge surplus have made a catch-up possible.

“This is the most bold effort to address our retired public school employees’ pension that we’ve ever done,” said Friendswood GOP Rep. Greg Bonnen, author of a proposed constitutional amendment.

“It will lead to this pension being actuarially sound,” he said. “It will allow our retirees to have an annual, ongoing increase.”

The House approved the constitutional amendment, 147-0. An enabling bill by Bonnen advanced on a voice vote.

While the Senate has a different approach, Tim Lee, retired teachers’ chief lobbyist at the Capitol, is hopeful.

“Texas education retirees worry every day about paying their bills and making ends meet,” Lee, executive director of the Texas Retired Teachers Association, said after the House’s votes.

In 2013, school district workers who retired before September 2004 received a 3% inflation adjustment, capped at $100 a month.

“The Texas House moved retirees one step closer to getting the first raise in 10 years,” Lee said. “For most TRS retirees, it will be the first raise they’ve ever seen in their monthly annuity.”

Under the House approach, if voters this fall approve the constitutional amendment, all teachers and district personnel who’ve been retired at least two years would receive a one-time adjustment in their January pension check.

Those who retired before 2004 would get a 6% increase, those who retired before 2014 a 4% raise and those who retired before 2021 a 2% adjustment.

Retirees who are 70 years old or older would receive a supplemental payment of $5,000.

The Teacher Retirement System would have to issue the stipend no later than February.

Bonnen’s bill to implement the constitutional amendment and carry out the chamber’s $5.05 billion plan also would create a system for granting future inflation bumps in pension checks, if the pool of pension money earns enough profits and interest on investments.

Starting Sept. 1, 2028, retirees could receive a cost of living adjustment of between 1% and 2%.

The “gain sharing COLA” would be triggered only if TRS meets certain metrics.

Over a period of five years, the pension fund would need to earn an average of a 7% investment return to provide a 1% gain sharing COLA. If over the same period, the fund earned an average return of 9%, it could provide the maximum bump of 2%.

Future retirees would have a three-year waiting period before they’d be eligible for the gain sharing COLAs.

In the House legislation, the state also would commit to making a “legacy payment” — estimated at $630 million a year — during each legislative session over the next 30 years. That would ensure enough money for all of the pension system’s currently unfunded liabilities, according to Legislative Budget Board documents.

Dallas Democratic Rep. John Bryant sought to improve and expand the House plan’s benefits but was rebuffed several times, mostly in party-line votes.

Bonnen’s package is “parsimonious,” Bryant said. He cited a record-breaking $32.7 billion revenue surplus in the current two-year cycle, which ends Aug. 31, and Comptroller Glenn Hegar’s estimate that the rainy day fund will end the 2024-2025 cycle with an end balance of $271 billion.

Only Texas and Louisiana have teacher retirement systems that do not offer cost of living adjustments and also do not let teachers participate in the federal Social Security system, which does provide annual inflation bumps, Bryant said.

“These people teach our children,” he said. “They taught us. We have a moral obligation to them.”

Bryant managed to pick up a handful of Republican votes for his proposal to increase the one-time cost of living adjustments. Under it, those who retired before 2004 would get a 10% increase, those who retired before 2014 an 8% raise and those who retired before 2021 a 6% adjustment. The House defeated the amendment, 79-67.

He and other Democrats have protested that active public school employees’ contribution to the pension system would be increased to 9% of paychecks, from 8.25% now. Bonnen noted the state likewise would increase its contributions, based on active employees’ salaries.

Bonnen, the House’s chief budget writer, said his legislation’s proposed new system allowing small but steady annual bumps in retirees’ checks, starting in five years, is a game-changer.

“We give an enhancement. Years go by. It erodes,” he said. “That’s where [fund] soundness becomes potentially compromised,” and lawmakers balk at the big amount it would take to pay for a modest bump. “We come back and repeat the cycle,” he said.

The Senate’s plan doesn’t have the gain sharing COLA system or the legacy payments.

As Houston GOP Sen. Joan Huffman’s bill was passed by the Senate, school district employees who retired before Sept. 1, 2013, would receive a one-time cost of living adjustment of 4%. Those who retired between September 2013 and September 2021 would get 2%.

Also, the Senate would grant a one-time supplemental payment of $7,500 for those age 75 and older.

After final House action on the enabling bill, expected early next week, the differences between the two chambers’ plans are likely to be handed to a House-Senate conference committee to resolve.