The Trillion Dollar Gap: Texas

Underfunded State Retirement Systems and the Roads to Reform

Texas needs to improve how it manages its long-term liabilities for both pensions and retiree health care and other benefits. The state has funded 91 percent of its total pension bill—beyond the 80 percent benchmark that the U.S. Government Accountability Office says is preferred by experts—with an unfunded liability of $13.8 billion.

Between 2003 and 2007, the Longhorn State paid less than 90 percent annually of what its own actuaries said was necessary. However, in 2008, it got back on the right track, paying 99 percent of its annual required contribution. Texas passed legislation in 2009 that increased the retirement age and service eligibility requirements for employees hired after September 1, 2009. This legislation also increased the employee contribution rates for members of the Employee Retirement System.

Meanwhile, Texas is one of 29 states with any assets set aside to cover its long-term liability for retiree health care and other benefits—but only $729 million, or less than 3 percent, of the total $29.3 billion bill coming due has been funded.

The Trillion Dollar Gap Texas Pension Funding