Texas Gov. Greg Abbott last week approved a measure that will increase pension contributions for both employees and the state, in an effort to improve the funding of the state’s Employees Retirement System.
Moody’s on Monday said the plan would improve the state’s pension funding situation and lead to better retirement security, even if workers will have to pay more out of pocket.
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.
