Pension Reform Newsletter — April 2019
ID 111263825 © Designer491 |

Pension Reform Newsletter

Pension Reform Newsletter — April 2019

Analysis of Texas’ proposed pension reform, public employees are living longer than previously assumed, and more.

This newsletter from Reason’s Pension Integrity Project highlights articles, research, opinion and other information related to public pension challenges and reform efforts across the nation. You can find previous editions here.

In This Issue:

Articles, Research & Spotlights 

  • Analysis of Texas’ Proposed Pension Reform
  • Rhode Island’s 2005 Pension Reform and Its Effect on Worker Retention
  • Public Employees Live Longer
  • Birmingham’s Credit Downgrade
  • Texas Supreme Court Upholds Dallas Pension Reform

News in Brief

Quotable Quotes on Pension Reform

Contact the Pension Reform Help Desk

Articles, Research & Spotlights

Analysis of Texas Senate Bill 12 and Its Impacts on Texas Teacher Pension Solvency

The Texas Legislature is currently considering significant reform meant to shore up the long-term health of the state’s largest pension, the Teacher Retirement System (TRS). Senate Bill 12 looks to gradually increase the annual contributions going into the system, which will help steer the system back to a path in which it is able to pay off its pension debts within 30 years, assuming actuarial assumptions hold. Some disagreement on the source of these increased contributions—how much of the increase will come from the employees or from the employer—still exists between the Senate and House versions of the bill, but both approaches will represent a similar result for the future of the system’s funding. To fully evaluate SB12, Reason’s Zachary Christensen, Steven Gassenberger, and Truong Bui perform an actuarial analysis on the long-term outcomes of the increased contributions into TRS. A detailed look into the proposal shows that the reform could greatly improve TRS’ solvency, but the system will continue to be highly susceptible to existing problems with contribution and assumption policies.


» REFORM SCORECARD: Does Texas’ 2019 Legislation Meet Objectives for Good Pension Reform?

» RELATED: Pension Solvency Overview Teacher Retirement System (TRS) of Texas

Learning from Rhode Island’s 2005 Pension Reform: What Did it Teach Us About Worker Retention?

A new study from the Center for Retirement Research (CRR) at Boston College explores the effect of pension benefit changes on an employer’s ability to retain public workers, using the example of a 2005 Rhode Island reform that greatly reduced pension benefits for active public employees that had not yet worked the minimum amount of years required for vesting. Reason’s Evgenia Sidorova explains the significant findings from this study and interprets what they mean for those making critical decisions for the public. She introduces some issues the CRR study may have overlooked and notes the need for further study on the subject of benefits and public worker retention.


Public Employees Are Living Longer Than Previously Assumed, New Report Finds

Actuarial assumptions on mortality rates play a major role in predicting the future value of promised pension benefits. A recent study from the Society of Actuaries (SOA) reveals that the way most public pensions develop these assumptions may be based on over-generalized and outdated information. Reason’s Anil Niraula details the significant findings of this study, namely that public workers tend to live longer than their counterparts in the private sector. These findings suggest that managers of public pensions should adopt their own assumptions on member mortality instead of relying on assumptions that are commonly accepted in the private sector. Failure to do so could result in unexpected increases in pension liabilities.


Birmingham’s Pension Woes Continue to Compound

After several consecutive years of insufficient contributions into their pension plan, the city of Birmingham, AL is beginning to experience major consequences that could greatly impact its future budgets. Last month, Fitch Ratings issued a downgrade on the city’s general obligation bond rating, citing Birmingham’s growing pension debt as the main contributor to their decision. In a new commentary, Reason’s Raheem Williams details the ongoing pension challenges the city faces, noting the significant costs that develop when a credit rating is downgraded. He notes that the Fitch downgrade is likely just the first of many more to come, if Birmingham fails to adopt significant changes in funding policy.


Texas Supreme Court Grants Dallas Police and Fire Pension System a Legal Victory

In March, the Texas Supreme Court upheld a recent reform to Dallas Police and Fire Pension System (DPFP). The reform, challenged by retirees of the system, adopted prospective reductions to interest rates for the system’s uniquely problematic deferred retirement option plan (DROP). In its ruling, the court explained that the change did not impact deposits made before the introduction of the lower rate. Commenting on the recent ruling, Reason’s Anil Niraula details the significance of the court’s decision in the ongoing reform effort for the beleaguered Dallas pension system.


News in Brief

Pension Integrity Project Releases Preliminary Arizona State Retirement System Solvency Analysis: Covering more than half a million public servants, the Arizona State Retirement System (ASRS) plays an unmistakable role in establishing the post-retirement security of the Grand Canyon State. After years of weakening solvency, the system faces a variety of challenges, some that are common among most states and others that are unique to ASRS. In an effort to increase public understanding of these challenges, the Pension Integrity Project at Reason Foundation has released a detailed ASRS solvency analysis using both historic data and actuarial forecasting to identify several areas of concern, highlighting the types of policies that could best improve the system’s long-term health. The full analysis is available here.

Quotable Quotes on Pension Reform

“The first thing you have to do is make up what you lost…And it takes years. And then you have to make up what you didn’t earn on what you didn’t have. It’s a pretty steep climb.”

–Executive Director of the Maine Public Employees Retirement System Sandy Matheson on paying off pension debt, quoted in Heather Gillers, “Why the Longest US Bull Market Has Failed to Fix the Nation’s Public Pensions,”, April 10, 2019.

“At the end of the day, it’s just this big item that needs to be paid…If we didn’t have to pay all these pension debts, we could use it for other educational expenses.”

–University of Missouri Associate Professor of Economics and Public Policy Cory Koedel, quoted in Sarah Butrymowicz, “How Rising Teacher Pension Costs Hurt School Districts,” The Hechinger Report, April 22, 2019.

“As we work with districts around the state, we are worried that the pension increases are undermining the equity promise of the funding formula…Districts are being placed in an increasingly untenable situation where they have to choose between funding pensions or services for high-needs students.”

–Chief Executive Officer of Pivot Learning Partners Arun Ramanathan, quoted in John Fensterwald “New Data Detail Soaring Costs of California School Pensions,” EdSource, March 21, 2019.

Contact the Pension Reform Help Desk

Reason Foundation’s Pension Reform Help Desk provides information on Reason’s work on pension reform and resources for those wishing to pursue pension reform in their states, counties and cities. Feel free to contact the Reason Pension Reform Help Desk by e-mail at

Follow the discussion on pensions and other governmental reforms at Reason Foundation’s website or on Twitter @ReasonReform. As we continually strive to improve the publication, please feel free to send your questions, comments and suggestions to

Published by the Pension Integrity Project at Reason Foundation

Edited by Zachary Christensen, Senior Policy Analyst, Reason Foundation

Stay in Touch with Our Pension Experts

Reason Foundation’s Pension Integrity Project has helped policymakers in states like Arizona, Colorado, Michigan, and Montana implement substantive pension reforms. Our monthly newsletter highlights the latest actuarial analysis and policy insights from our team.

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