Moody’s Praises Texas For Pension Contribution Increases


In a report released Monday, Moody’s Investors Service praised Texas for boosting the pension contributions required from workers and the state.

Texas increased the contribution rates recently in a bid to more rapidly improve the funding of its Employees Retirement System.

More from the Dallas Morning News:

As of August, experts estimate that the Employees Retirement System will have an unfunded liability of $8 billion, the Moody’s Investors Service said in a credit outlook report on Monday.

Still, the contribution increases mean that the pension plan’s IOUs “will be paid down in 31 years,” as opposed to “the previous ERS trajectory where unfunded liabilities were never paid down,” the report says. It called the bill, by Rep. Dan Flynn, R-Van, a “significant improvement.”

Last week, Gov. Greg Abbott signed the measure, which increases employee contributions to 9.5 percent of their pay, from 7.2 percent. Separately, they are receiving a cost-of-living raise to cover the increased contribution. Also, the state will increase its contributions to 10 percent of payroll, from 8 percent, starting Sept. 1.

“These moves are credit positive and will slow ERS’ annually increasing unfunded liabilities,” the report by Moody’s says.

Texas ERS is approximately 77 percent funded.


Photo credit: “Flag-map of Texas” by Darwinek – self-made using Image:Flag of Texas.svg and Image:USA Texas location map.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons

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