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Political Report

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The Legislative Report
By SHEILAH PEPPER
The Gazette Staff
Austin: Apparently, the Teacher Retirement System of Texas may be feeling the effects of the financial upheaval of the past year, for many years to come. An outside actuary said that the depth of what the markets have done in this decade will be felt by the teacher's fund for at least 20 years.
Over the past 10 years, the fund's average earnings were 3.3 percent with an expected return of 8 percent.
The $94 billion pension fund has 1.3 million active and retired members. The fund can cover benefits through 2058 so there is no concern that retirees won't get their regular checks.
The Legislature tried to provide retirees a one-time payment of $500 in the 2010-2011 budget. However, in November, the attorney general determined that the payment could not be made because it might violate the state constitution.
So the only way to increase retiree benefits is to make the fund "actuarially sound" - meaning that it can cover its current and projected obligations over 31 years. It now has 83 cents for every dollar needed to cover promised benefits over the long term, which is the lowest funded level since 1987. That figure is expected to drop next year because $18 billion in investment losses will be accounted for over several years.
During the past year, the fund's assets plummeted from almost $105 billion in August 2008 to $67 billion in early March then went back up to $89 billion as of this August. For the fiscal year, which ended in August, the market return on the pension fund's assets was down 13.5 percent.
However, the most recent quarterly performance, with more than $10 billion in investment returns, was the best in its history.
But it is not likely that investment returns alone will get the fund out of the hole. To bring it back to its 2008 level, a one-year return of 38 percent or an annual return of 11 percent for 10 years would be needed. The only other ways to bolster the long-term condition of the fund are to increase the rate of contributions, which come from both the state and the teachers, or to reduce benefits.
This will come before the Legislature when it convenes again in 2011.
On the political scene, some recent reports suggest that Sen. Kay Bailey Hutchison believes it is Republicans and not independents or Democrats that can give her a victory over Gov. Rick Perry in the March GOP primary.
Hutchison's campaign expects a surge of voters who support Republican but do not regularly vote in Republican primaries.
Perry's campaign also expects a higher-than-usual turnout from general election voters who support Republicans but don't usually vote in primaries. He has cast the Senator as soft on spending and a creature of the Washington culture.
Both campaigns anticipate higher than a usual turnout for the primary. The Hutchison campaign estimates that 1.5 million will vote, while the Perry campaign puts its estimate at 1.2 million.
It has been reported that 73 percent of Texas Republican primary voters in 2008 identified themselves as conservatives, 20 percent said they were moderates and 8 percent said they were liberals.
A November Rasmussen Reports poll gave Perry a lead of 11 percent over Hutchison among voters who say they plan to vote in the Republican primary. However, Perry's lead among those who described themselves as conservatives jumped to 22 percent.
On the Democrat side, Houston hair tycoon Farouk Shami said on Dec. 7th that he will move forward with his candidacy for governor even though most of the democrat establishment has lined up behind Houston Mayor Bill White. Shami said, "People are tired of career politicians. They want an honest man. I'm that man."
Shami, who was born in the Middle East, said he was inspired by Barack Obama's campaign. He said he would campaign on bringing jobs to Texas, improving health care, providing quality education and preserving the environment.
Recently, Shami fired several high-level campaign officials, including campaign manager Joel Coon and communications director Jason Stanford. They had been on the job less than three weeks.
 

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