TCTA urges state lawmakers to do more protect TRS pensions

The House Committee on Pensions, Investments and Financial Services met Aug. 18 to examine the Teacher Retirement System of Texas (TRS) and determine whether the pension system is financially strong enough to meet its obligations to current and future retirees. TCTA provided testimony urging the Texas Legislature to do more to protect the retirement security of Texas educators.

TRS remains a strong, professionally managed defined benefit pension system. However, the system currently faces a significant unfunded liability - the difference between the benefits TRS has promised to pay and the assets and future contributions expected to be available to pay those benefits. According to the most recent TRS actuarial valuation, the system has approximately $64.9 billion in unfunded liabilities, is 77.5% funded, and has an estimated 35-year funding period. State law considers a funding period of 31 years or less to be actuarially sound.

The funding challenge stems from substantial teacher salary increases approved by the Texas Legislature in 2025. Those increases were an important investment in Texas educators, but they also increased the pension benefits associated with those higher salaries. Lawmakers did not provide a corresponding payment to TRS to cover the additional pension liability. As a result, the system's unfunded liability and projected funding period increased.

TCTA believes the state should take responsibility for addressing this gap. TCTA urged the legislature to make a substantial one-time payment to TRS sufficient to restore actuarial soundness and, preferably, significantly shorten the funding period. TCTA also called for a higher ongoing state contribution to TRS so that the state assumes a more appropriate share of the cost of the retirement benefits educators earn through their years of service.

TCTA emphasized that teachers and school districts should not be expected to bear the primary cost of correcting a funding problem created by state policy. Texas educators already contribute 8.25% of their salaries to TRS. The state's base contribution is also 8.25%, while school districts make an additional contribution subject to statutory limits. Compared with other states, Texas' overall public contribution to educator pensions remains relatively low.

A strong pension is an important part of teacher compensation and plays a critical role in recruiting and retaining experienced educators. Teachers spend decades educating Texas children, preparing the state's future workforce and strengthening their communities. They have earned a pension worthy of that lifetime of service.

TCTA also urged the legislature to address the purchasing power of retirees' benefits. The permanent cost-of-living adjustment (COLA) approved in 2023 was an important step, but retirees received different increases - 2%, 4% or 6% - based on their retirement dates, and TRS does not have an ongoing automatic COLA. Since the January 2024 COLA took effect, inflation has continued to erode retirees' purchasing power. TCTA supports establishing a financially responsible, actuarially conditioned COLA that could be provided when TRS meets specific financial and actuarial requirements.

TCTA's goal is a TRS system that is financially strong for the long term and provides educators with the retirement security they have earned. The state should make the investment necessary to restore actuarial soundness, contribute more going forward and create a sustainable path for protecting retirees' purchasing power.

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• TRS/Benefits