August 02, 2009

Using TRS like daddy's credit card

Apparently, Harris County District Judge Dion Ramos has dismissed a suit filed on behalf of retirees against Teachers Retirement System of Texas (TRS). The case was based on their benefits being diminished by risky investments made by TRS.

TRS argues in its response that the members have no standing to sue because they have not been harmed.

“The premise of the suit is that because the net value of assets of TRS trust fund has declined as a result of the historic upheaval in the world economy that plaintiffs have somehow been damaged. That is simply not the case,” TRS lawyers wrote.

“Members and annuitants have no investment account or interest in the pension fund; their interest is in the benefits as defined by law,” and those benefits have not been threatened, the brief says.

While it's true that TRS is a defined benefit pension plan, there are three issues...

1) Half of the funding for TRS comes from the people who will eventually receive benefits from it, people who work in the public school systems all over Texas. While it doesn't give them an actual account, it's still their money. Unless you want to call their contribution an income tax. And call their retirement checks an entitlement.

2) The benefits can be reduced by the Legislature IF the fund performs poorly and the Lege doesn't feel like making up the gap. Which, just FYI Judge Ramos, they AREN'T required by law to do.

3) The likelihood of the Lege making up losses in TRS to fulfill current statutory obligations is about zilch. Just ask Sen. Duncan.

Needless to say, it's one hell of a stretch for this case to be so blithely dismissed. Especially when retirees haven't received a COLA since 1995, proving clearly that retirees ARE negatively impacted by poor performance at TRS.

The more interesting thing here is that some of the advisers and board members at TRS (all appointees of 39%) are financial professionals at firms that may be doing business with TRS. One has to wonder where AG Abbott is on that issue. Has he even looked into the possibility that there may have been some self dealing?

Go on, Abbott. Run for LG. I'm sure no one from a school district will mind your failure to investigate exactly what happened.

Let's also keep in mind that during Britt Harris' time as Chief Investment Officer, the fund has lost a THIRD of it's value. And these high risk investments aren't necessarily going to turn around like stocks. Some of them may have expired worthless and simply have ceased to exist or may have counterparties that no longer exist. It's almost comical that this happened WITH financial professionals in advisory roles. The same number of professionals 39% wants to keep on...

Gov. Rick Perry vetoed a bill that would have given more voice to retirees on the board of the Teacher Retirement System of Texas.

That additional voice for retirees would have meant one less financial professional on the nine-member board, which would have been “an inappropriate adjustment in these uncertain economic times,” Perry said in his veto statement.

“The significance and ramifications of the board’s decisions on the futures of those who steward our children’s education make it imprudent to dilute the board’s financial expertise with House Bill No. 2656,” Perry continued.

The final House Bill 2656 was a much more watered-down version of the measure that easily cleared the House. That version would have stripped Perry of much of his authority to appoint members of the nine-member board.

Sure, 39%. Right. Because of that 'financial expertise' retirees haven't seen a cost of living adjustment since 1995 and the fund itself will be exhausted by 2040. Sure does look like they're doing a bang up job at TRS.

And, finally, a MASSIVE shout out of thanks to the Republicans in the Lege who voted against the stronger bill which would have stripped 39% of the authority to appoint members of the TRS Board. I bet the teachers in your district will be THRILLED to get mailers telling them how voted to make sure they would be able to enjoy the fancy catfood during their retirement, not the cheap kind.

Posted by mcblogger at August 2, 2009 12:17 AM

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