TEXPERS Special Report: Texas' State and Local Pension Funds Achieve Continuing Improvements through 2016

The 93 state and local pension funds which report financial statistics to the Texas Pension Review Board combined in 2016 to achieve continuing overall improvement to their amortization periods, the PRB’s single “most appropriate” measure of public retirement systems’ health,** according to a TEXPERS comparison of PRB data.***

TEXPERS offered the following observations on the chart above:         

  • The most constructive way to read the chart is to understand that increases in the top rows and decreases in the bottom three rows show improvement.
  • There are 37 pension systems in the Pension Review Board’s recommended amortization period of 0-25 years, which is two less than the 39 in September’s report. Even so, 37 is the 2nd highest in the recommended category in the last seven years.
  • The most substantial improvements in the 2016 period occurred in the 5 pension systems moving out of the >40<infinite category. While it is possible that one of those 5 moved into the infinite category, four others must have moved into the better category of >25<40 years.

TEXPERS Executive Director Max Patterson offered the following comments on the report:

“This positive trend for amortization period needs perspective. 2016 was a positive stock market year and most pension funds don’t get their investment return data until the latter part of January 2017. That improved performance data would not have been included in this report. We believe the year-over-year numbers provided to the PRB for their summer reports are better indicators and we feel certain the next report will have even stronger performance for all pension funds,” Patterson said.
“We continue to maintain that Texas pension fund Trustees and staff can, with time, make necessary adjustments to improve upon various measures of performance. As long as the key ingredient of appropriate funding is provided by their city employer sponsor, we will continue to see ongoing improvements to amortization periods.

More graphics are available at amortization-report-2017.
* The figures indicated in this report include the data from six full years from 2011 through the summer of 2016, with the half year numbers from 2016 included through January 2017. Most pension funds don’t get their investment returns reported to them until the end of January, so the summer time year-over-year comparisons are more accurate indicators. This half-year report is intended only for general monitoring and discussion purposes. 
**  The PRB defines amortization period as “the length in time, in years, needed to pay for the unfunded actuarial accrued liability (UAAL) and reflects a system’s ability to pay its normal cost plus UAAL.” UAAL is the present value of benefits earned to date that are not covered by plan assets and normal cost is the portion of cost of projected benefits to the current year.[1]
*** TEXPERS based its assessment on specific information requests it made of the PRB for standardized year-over-year comparisons of Actuarial Valuation Reports through the August reporting periods, plus the ½ year data through January 2017. The PRB data are available on a dedicated page on the TEXPERS website: /amortization-report.
Max Patterson may be reached for contact by emailing Joe Gimenez at [email protected] or calling him at 713.478.8034.

[1] “Summary: Study of the Financial Health of Texas Public Retirement Systems,” by the Texas Pension Review Board, December 2014, page 2. http://www.prb.state.tx.us/files/reports/financial_health_study_summary.pdf