Texas TRS – fundamental reform will be hallmark of 2012

In his first media interview since becoming executive director of the $105bn Teacher Retirement System of Texas, Brian Guthrie talks to Raquel Pichardo-Allison about the raft of legislative reviews that will drive his agenda in 2012

Raquel Pichardo-Allison: At a recent board meeting, you said the next 12 months will be driven by legislative requirements. Which legislative issues will most drive the agenda in 2012?

Brian Guthrie: The big issue is going to be our healthcare system. We manage two programmes, but only one of them is subject to direct funding by the legislature. We get a variety of sources of income for the (retiree healthcare) programme – from the state, from the members, retiree premiums and some federal funding.

None of those funding sources, with the exception of perhaps the federal funds, which are reimbursements, are in any way tied to our expenditures. There’s a statutory requirement that the state contribute 1% of active member payroll to TRS to pay for TRS-Care. We have cost drivers that are trending the cost of the programme up, but we don’t have any income that is driven by the same factors.

We’ve been charged by the legislature to do a study to submit to them by next September with options. In January 2013, we will have another session where this issue will be discussed.

 
Raquel Pichardo-Allison: That programme will be out of cash soon.

Brian Guthrie: That’s correct. We enjoy a healthy balance of $900m … but it’s rapidly being depleted, and based upon our projections, its going to be in the red by the early part of 2014.

 

Raquel Pichardo-Allison: Are there any plans to try to invest your way out of that?

Brian Guthrie: We don’t have that luxury, because with only $900m and expenses outpacing revenue at such a rapid pace, we need that cash on hand.

We need to take a fundamental look at the funding sources we receive, member premiums, the benefits they’re receiving and see if there’s any plan changes that can be made.

Raquel Pichardo-Allison: For pension funds not in the US, the idea of having some sort of healthcare programme attached to a retirement system is a bit unusual.

Brian Guthrie: It’s even unusual here in the US. When I go to conferences, they kind of look at me like, ‘Man, you poor soul. Not only do you have to manage the pension fund, but you have a healthcare programme on top of that’.