TEXPERS Report: Texas’ State and Local Pension Funds Continue Steady Trend Performance with Conservative Adjustments

HOUSTON (October 24, 2017) – A new report from the Texas Association of Public Employee Retirement Systems demonstrates how 93 state and local pension funds combined in 2016-2017 to maintain positive trend performance in the key metric recommended by the Texas Pension Review Board. The steady trend data comes despite numerous systems reducing their target rate below eight percent, a conservative move which, mathematically, could have moved pension systems in undesirable directions but did not.
TEXPERS based its assessment on the PRB’s year-over-year comparisons of pension funds' amortization periods. An amortization period indicates the number of years needed to pay off all present and future projected benefits to employees. It is similar to a home mortgage in terms of years needed to pay off interest and principal owed. The PRB says that amortization periods are the single “most appropriate” measure of public retirement systems’ health.
The most substantial improvements in the 2016-17 period occurred in the two pension systems moving out of the infinite category, and the  >40<infinite category, into the >25<40 year category. In addition, two more systems now are in the PRB’s recommended category, the greater than zero, less than 15-year category. 
TEXPERS’ report shows that a significant number of systems dropped the rate of return which they seek. Only 24 systems now target average rates of return of 8% or more, compared to 35 systems which did so in the last PRB report. Most systems (42) aim for a 7.50-7.99% average yearly return, as compared to 31 in the prior report. The targets are a major factor in calculating the contribution rate needed from employees and their city sponsor.
TEXPERS executive director Max Patterson said: “The Pension Review Board recognizes that amortization period trends matter more than accountants’ moment-in-time snapshots of unfunded liabilities when assessing pension fund health. This high-level overview of pension systems’ health continues to warrant the trust which lawmakers place in local pension boards to deliver reasonable earned benefits to police, firefighters and municipal employees at minimal contribution from taxpayers.”
“Our report would be incomplete if we did not note the intrinsic value of all our cities’ police, firefighters and municipal employees to the citizens they served in the wake of Hurricane Harvey,” Patterson said. “We’ve noted for years the unmeasurable contributions these fine people make to civic society. We saw that dynamic on display across most of the southern half of Texas. It’s hard to assign mathematical values to their actions, but it is the reason why strong pension funds exist and ought to be maintained.”

The full report is available at 2017-amperiod-target and charts at 2017_am_period_charts.         
The Texas Association of Public Employee Retirement Systems (TEXPERS) is a statewide voluntary nonprofit association which provides quality education to trustees, administrators, professional service providers and employee groups and associations engaged or interested in the management of public employee retirement systems.

Media Contact: Joe Gimenez, 713.478.8034, [email protected]