Texas Pension Funds Health

James Quintero, the Director of the Center for Local Governance at the Texas Public Policy Foundation was interviewed by Lawrence Person' Blog on the subject of the health of Texas public pension funds. It is an excellent summary and points out that the under funding issues are mainly in the large cities that use defined benefit plans.

 Asked whether other large pensions in Texas were as bad off as the Dallas Police and Fire Pension, Quinterro said simply, "If you’re a taxpayer or property owner in one of Texas’ major cities, I’d be concerned."

Georgetown uses a cash balance plan, TMRS, that is generally much more fiscally sound than the defined benefit plans. The TMRS plan still suffers from overoptimistic investment returns. TMRS assumes a 6.75% annual return, whereas they have actually achieved about 5.6% annual returns over the past five years. This results in a larger unfunded liability than reported that taxpayers are on the hook to pay.