Pension Cost Burdens on Texas Cities and Counties
This study evaluates the burden of public employee pensions on Texas’ local governments by computing the ratio of pension contributions to total revenue for over 300 cities and counties within the state. The study finds evidence that Texas municipalities generally compare favorably to those elsewhere around the country but could still benefit from reform. A major reason that Texas local governments stack up so well is that the state’s two multi-employer plans limit the amount of risk transferred from employees to taxpayers.
That said, the Texas County and District Retirement System and the Texas Municipal Retirement System are not the same as defined contribution plans; an extended period of poor investment performance in these systems would have to be offset by additional taxpayer funding. Larger cities that have single-employer plans—especially Houston—tend to have greater pension burdens than local governments that participate in the multi-employer plans. Given the size and growth of this burden, it is important that state and local policymakers begin to examine ways to improve the affordability and reliability of these systems. One avenue to reform should include a restoration of local control of state governed pension plans.