Employee Benefits

Introduction


In fiscal 1992, Texas spent $1.3 billion on benefits for public school teachers and the state s work force of nearly 300,000, including retirement programs, insurance and social security payments.

The majority of this funding goes to the state s three major retirement systems the Teacher Retirement System (TRS), which provides retirement, death, survivor and disability benefits for public education employees; the Employees Retirement System (ERS), which serves elected officials and state employees outside of education, and the Optional Retirement Program (ORP), an alternative retirement program for faculty members of institutions of higher education. These programs all are funded jointly by state and employee contributions.

In addition, Texas offers state employees, employees of higher education institutions and their dependents a Uniform Group Insurance Program, which provides group health insuranc e, life insurance and accident and disability coverage, as well as health and life insurance for retired employees.

These benefit programs represent a substantial investment of state resources. In view of Texas financial problems, TPR recommends that the state offer an incentive for eligible members of ERS to retire during the 1994-95 budget period. This incentive a 12.5 percent increase in retirement benefits would produce payroll savings in the next biennium by reducing the state s work force. Texas actuarial costs would rise, but continuing strong performance from ERS investments should defray part or all of these higher costs.

TPR also has found that the state s contribution rates for TRS, ERS and ORP are higher than necessary to fund the systems in an actuarially sound manner. Small reductions in these rates would maintain full protection of the programs and all member benefits , while saving the state hundreds of millions of dollars over the next two years.

TPR also recommends that TRS establish a home-loan program for active and retired members. Still another proposal would continue a delay in the state s last quarterly payment to TRS. The last payment for the 1992-93 budget period will be pushed a single day into fiscal 1994, to help balance that budget; TPR recommends this step be repeated at the end of fiscal 1995.

In all, TPR s recommendations concerning employee benefits would reduce state spending demands by $722.5 million in fiscal 1994-95, and would reduce state employment by an estimated 1,340 positions. Dedicated state accounts and funds would undergo a loss of nearly $45 million.

Over the next five years (1994-1998), these recommendations would save the state more than $1 billion. Texas dedicated accounts and funds would lose about $78 million.