Legislative Updates

Budgetary Updates:

• 3.3 billion remaining from last session, and a Rainy day fund 13.6 billion.
• 27 billion surplus on the state’s coffers
• The state’s portion of Medicaid is always in the negative, currently 27 billion deficit, Boarder security 4 billion, Emergency deployments, etc… These will all be looked at for expenditures. 
• 4 billion towards property relief and teacher raises is a priority for the Lt Governor as well as infrastructure needs, including roads, bridges, and broadband (HB5). Utilities commission will be under sunset review, 3.5 billion in grant money from the feds are available. 10 year abatement for M&O taxes for school systems are up for debate.

Predictions:

• Chapter 312 economic development incentives are viewed negatively these days. Expect next session to bring back economic incentives, chapter 313, 380 & 381already have been discussed. Bill already being drafted on 313, and they are on their 10th version.
• Land use issues concerning ETJ’s, affordable housing, and annexations will be a big discussion, including fees related to new construction. 
• With regard to politics, Republicans have owned the state since early 2000’s. Not much change is expected. However, state elections are getting interesting. The Governor’s race will be close, likely single digits.

Five Legislative agenda Items pertaining to TFCA

1. DISEASE PRESUMPTION
Chapter 607 of the Texas Government Code states that a firefighter, peace officer, or emergency medical technician (EMT) who suffers from certain respiratory diseases or illnesses that result in death or disability is presumed to have contracted the disease or illness during the course and scope of employment.

Under Section 607.057, the presumption applies to a determination of whether a firefighter, peace officer, or EMT’s disability or death resulted from a disease or illness contracted in the course and scope of employment for purposes of benefits or compensation provided under another employee benefit, law, or plan, including a pension plan.

Presumption Legislative History

After extensive negotiations between cities and firefighters, the legislature in 2005 passed a bill, S.B. 310 by Senator Deuell, which provided that certain diseases contracted by firefighters and EMTs are presumed to be work-related and thus included in workers’ compensation coverage. Although several bills were filed in the next several sessions, additional presumption legislation did not pass until 2015, perhaps in recognition of the political capital expended reaching a compromise on S.B. 310 in 2005.

In 2015, H.B. 1388 by Representative Bohac passed. That bill required that:

1. A rebuttal made by a government employer regarding workers’ compensation disease presumption include a detailed statement of the evidence used to determine that the disease in question was not caused by the individual’s employment;
2. A denial by a carrier include evidence reviewed in making the denial. 2019 saw two major presumption bills pass.

S.B. 1582 by Senator Lucio added peace officers, for purposes of workers’ compensation coverage, to the firefighters’ disease presumption statute for certain illnesses broadening the types of illnesses police officers would be presumed to contract on the job.

Perhaps more significantly, S.B. 2551 by Senator Hinojosa made major changes to the cancer presumption provision affecting firefighters and EMTs. Among other things, the bill:

1. Provided that certain fire fighters and EMTs who suffer from one or more of the following 11 cancers resulting in death or total or partial disability are presumed to have developed the cancer during the course and scope of employment as a firefighter or EMT:
   1. Cancer that originates at the stomach, colon, rectum, skin, prostate, testis, or brain; (b) non-Hodgkin’s lymphoma;
   2. Multiple myeloma;
   3. Malignant melanoma;
   4. Renal cell carcinoma;
2. Repealed the law that provided for a presumption to apply, the cancer must be known to be associated with firefighting or exposure to heat, smoke, radiation, or a known or suspected carcinogen;
3. Repealed the law that provided that the presumption could be rebutted by a preponderance of evidence that a risk factor, accident, hazard, or other cause not associated with the individual’s service as firefighter or EMT caused the individual’s disease or illness, and replaces that standard with a showing that a risk factor, accident, hazard, or other cause not associated with the individual’s service as a firefighter or EMT was a substantial factor in bringing about the individual’s disease or illness, without which the disease or illness would not have occurred.

The League and TML Intergovernmental Risk Pool worked closely on the bill all session and supported its passage.

With such significant reforms passing in the 2019 session, it would be reasonable to think that presumption bills wouldn’t gain much traction in the 2021 legislative session. However, the COVID-19 pandemic changed that calculus. S.B. 22 by Senator Springer became effective June 14, 2021 (and retroactively applied to a COVID-19 diagnosis on or after the date of the governor’s disaster declaration on March 13, 2020), and provided a disease presumption for first responders diagnosed with COVID-19.

The new COVID-19 presumption, which expires September 1, 2023, applies to peace officers, firefighters, EMTs, and detention and custodial officers only if various conditions are met. It applies only when the first responder:

• Is employed during a gubernatorially-declared disaster and contracts the disease during that time;
• Is employed on a full-time basis and diagnosed with COVID-19 using a test authorized or approved by the U.S. Food and Drug Administration;
• Had been on duty within 15 days before being diagnosed;
• If deceased, had been diagnosed using a U.S. Food and Drug Administration-approved test or by another means, including by a physician; and
• If deceased, had been on duty within 15 days before the diagnosis, began to show symptoms, or was hospitalized for such symptoms.

The bill has some retroactive effect. For example, a first responder who filed a claim between March 13, 2020 and June 14, 2021 and whose claim was denied, is entitled to request reprocessing of the claim under the new presumption. A request to reprocess a claim must be filed no later than June 14, 2022 (one year after the effective date of the bill). If a first responder contracted COVID- 19 between March 13, 2020 and June 14, 2021 and never filed a claim, he is entitled to file a claim no later than December 14, 2021.

A city that decides to rebut a COVID-19 presumption cannot do so based solely on evidence relating to the risk of exposure to COVID-19 of a person with whom a first responder resides. However, there is no prohibition to using a rebuttal when the person with which the first responder resides tests positive for COVID-19.

The TML Legislative Program provides that the League oppose legislation that would substantively change or expand the scope of the current disease presumption law, unless doing so is supported by reputable, independent scientific research.

We made a motion to add a second position to this TML recommendation. “The TML Legislative Program provides that the League support legislation that would extend the current disease presumptive law for COVID-19. The motion was seconded but failed by an estimated 4:1 ratio. 

2. INCREASING THE MAXIMUM HIRING AGE OF FIREFIGHTERS
A firefighter in a civil service city is ineligible to begin a position if he/she is over 35 years of age. The civil service firefighter age hiring limit is set by Section 143.023(b) of the Local Government Code: “A person may not be certified as eligible for a beginning position in a fire department if the person is 36 years of age or older.”

Each city in Texas that has adopted civil service standards for firefighters is subject to this age restriction, sometimes making firefighter recruitment very difficult in cities across the state. Raising the maximum hiring age for firefighters from 35 to 45 would allow for the recruitment and hiring of qualified individuals who have waited later in life to become a firefighter or those who have waited until after their military obligations were complete.

This issue was brought to TML by the City of Belton prior to the 2021 legislative session. However, as the session moved along the City of Belton decided against pursuing this idea due to a variety of legislative and political reasons.

The Texas Local Government Code currently allows for the hiring of temporary fire fighters and police officers under limited circumstances but does not allow them to become permanent civil service employees with benefits:

Sec. 143.083. EMERGENCY APPOINTMENT OF TEMPORARY FIRE FIGHTERS AND POLICE OFFICERS.

1. If a municipality is unable to recruit qualified fire fighters or police officers because of the maximum age limit prescribed by Section 143.023 and the municipality's governing body finds that this inability creates an emergency, the commission shall recommend to the governing body additional rules governing the temporary employment of persons who are 36 years of age or older.
2. A person employed under this section:
   1. is designated as a temporary employee;
   2. is not eligible for pension benefits;
   3. is not eligible for appointment or promotion if a permanent applicant or employee is available;
   4. is not eligible to become a full-fledged civil service employee; and
   5. must be dismissed before a permanent civil service employee may be dismissed under Section 143.085.

The TML Legislative Program provides that the League support legislation that would increase the maximum hiring age for firefighters in a civil service city from age 35 to 45, or to eliminate the maximum hiring age altogether.

3. EMERGENCY SERVICE DISTRICTS (ESDs)
In recent years, a number of issues have cropped up involving ESDs and cities. Some of these issues involve the allocation of sales taxes between cities and ESDs. Others deal with more fundamental questions of ESD authority in the city limits and the city’s extraterritorial jurisdiction.

Legislation passed in 2007, S.B. 1502 by Zaffirini, allows an ESD to “carve out” portions of the district that are already at the two-cent sales tax cap, thus permitting the district to impose a sales tax in non-capped portions of the ESD. As a result of this bill, cities have experienced an increased number of new ESD sales taxes in their ETJ (prior to the bill, an ESD couldn’t pass a sales tax unless the entire district was eligible under the two-cent cap). Further, when a city annexes territory located in the ESD, the city is unable to collect sales taxes if they have already been claimed by the ESD.

In 2013, legislation was filed and passed that represents a step in the right direction for cities on this issue. H.B. 3159 by Isaac authorized a city that annexes territory served by an ESD (but does not provide emergency services in the newly-annexed area) to enter into an agreement with the ESD to divide the sales tax revenue in the newly-annexed area in an amount acceptable to both entities. The bill was not perfect, since an ESD could still refuse to negotiate such an agreement with the city and therefore limit the city sales taxes to be collected in the newly-annexed territory. However, some cities have utilized this authority to collect a higher percentage of sales taxes than they otherwise would have received without an agreement.

There are many other issues that can occur between cities and ESDs, including whether ESDs should be allowed to form outside the city limits or ETJ and then expand into the ETJ or city limits without the city’s consent. In 2013, Representative Goldman filed H.B. 1798, which would have required city council approval for an ESD to expand into a city’s corporate limits or ETJ. (Under current law, an ESD must receive city council approval when forming in the city limits or a city’s ETJ, but only for the initial formation of the district.) Oftentimes a city is providing emergency services in the ETJ when an ESD holds an election for the district to expand into the area, yet the city does not have the statutory authority to approve of such expansion. From the city perspective, if an ESD must receive city council approval when initially forming in the city limits or ETJ, why shouldn’t the ESD receive council approval if it seeks to expand into the same area? Currently, there is litigation involving the City of Huntsville and an area ESD on this exact question.

Another problem for cities is that the statute governing ESDs—Chapter 775 of the Health and Safety Code—does not give a city the ability to remove itself from an ESD if it had previously agreed to be a part of the district. As a result, there are some cities in the state that are legally unable to remove themselves from an ESD, even if the city is capable of providing the same level of services to the area within the city. Ironically, the only ESD bill that passed in 2015 (H.B. 3666 by Workman) authorized ESDs to remove themselves from a metropolitan transit authority. Legislation was filed in 2021 to require an ESD board to remove territory from the ESD on request of a city if the city secured an alternative emergency services provider – H.B. 2323 by Representative Schofield and the companion bill, S.B. 1473 by Senator Miles. Neither bill received a hearing.

The committee should discuss whether the League should take a position on legislation that would further address sales tax allocation when a city annexes an area located in an ETJ, legislation that would require council approval when an ESD seeks to expand into a city or a city’s ETJ, as well as legislation that would allow a city to remove itself from an ESD.

There currently are no positions on city relationships with ESDs in the TML Legislative Program. Many cities have voiced concerns over their interactions with ESDs and where state law may be lacking. Past positions in the TML Legislative Program on ESD-related issues include:

• Support legislation that would allow cities to remove themselves from an ESD if the city is capable of providing services to the area.
• Support legislation that would require city council approval for an ESD to expand into a city’s corporate limits or ETJ.

This motion was changed from “support” to “seek introduction and passage,” meaning attempt to find a sponsor, will provide testimony, and will otherwise actively pursue passage. in addition, they added language to force ESD’s into mediation or arbitration for a final disposition. 

4. BUILDING CODES/PERMIT FEES
Uniform building codes can make construction and inspection easier and more cost-effective. However, because Texas is a vast state with many different climates and topographical features, the TML membership usually insists that each city be allowed to amend any mandatory codes to meet that city’s needs. Prior to 2001, Texas had no statewide standard for any residential or commercial buildings. Each city chose which, if any, building codes to apply within the city, and each city amended its code to meet local concerns. The most common codes were the Uniform Building Code and the Southern Standard Building Code.

In 2001, at the behest of homebuilders, the Texas Legislature adopted S.B. 365, now codified as Section 214.211 et seq. of the Texas Local Government Code. S.B. 365 adopted the International Residential Code (IRC) and the National Electrical Code as the standard building codes for residential construction in Texas cities starting January 1, 2002. Under the statutes, cities are authorized to make amendments to these codes to meet local concerns.

Also in 2001, the legislature adopted S.B. 5, which is now codified as Section 388.003 of the Texas Health and Safety Code. S.B. 5 adopted the Energy Efficiency Chapter of the IRC for single-family residential construction and the International Energy Conservation Code (IECC) for all other residential, commercial, and industrial construction. The bill became effective on September 1, 2001, and cities were required to establish procedures for the administration and enforcement of the codes by September 1, 2001. Here again, cities are authorized to make amendments to the codes to meet local concerns in most cases, even after comprehensive amendments in 2015.

S.B. 283, passed in 2003, required any city that adopts a building code other than the International Residential Code to adopt and enforce either prescriptive provisions for the rehabilitation of buildings or the rehabilitation code that accompanies the city’s building code. The bill is codified as Section 214.215 et seq. of the Local Government Code.

Prior to 2005, no standard building code existed for new commercial construction, other than the applicable IECC provisions. Many cities still used the Uniform Building Code or the International Building Code for commercial construction, while others had adopted the newly- developed International Building Code.

In 2005 the legislature passed S.B. 1458, which provides that:

1. The International Building Code is adopted as the municipal building code in Texas for commercial and multi-family construction;
2. A city may establish procedures to adopt local amendments to the International Building Code and for the administration and enforcement of the code;
3. A city that has adopted a more stringent commercial building code before January 1, 2006, is not required to repeal that code and may adopt future editions of that code; and
4. The National Electrical Code applies to all commercial buildings in a city for which construction begins on or after January 1, 2006, and to any alteration, remodeling, enlargement, or repair of those commercial buildings.

The 2009 session brought a bill that, as filed, would have been detrimental to all cities. The bill, S.B. 820, ultimately became a negotiated compromise that all parties could live with. It applied only to a city with a population of more than 100,000, and it provided that on or before the 21st day before the date the governing body takes action to consider, review, and recommend the adoption of or amendment to a national model code governing the construction, renovation, use, or maintenance of buildings and building systems, the governing body:

1. Shall publish notice of the proposed action conspicuously on the city's Internet website;
2. Shall make a reasonable effort to encourage public comment from persons affected by the proposed adoption or amendment; and
3. On the written request of five or more persons, shall hold a public hearing open to public comment on the proposed adoption or amendment on or before the 14th day before the date the governing body adopts the ordinance.

The bill also provides that if the governing body has established an advisory board or substantially similar entity for the purpose of obtaining public comment on the proposed adoption of or amendment to a national model code, the requirements described above do not apply. In addition, the bill provides that the governing body of a city with a population of more than 100,000 that adopts an ordinance or national model code provision that is intended to govern the construction, renovation, use, or maintenance of buildings and building systems in the city shall delay implementing and enforcing the ordinance for at least 30 days after final adoption, unless a delay in implementing or enforcing the ordinance would cause imminent harm to the health or safety of the public.

S.B. 1410 was a bill that passed in 2009 despite strong municipal opposition. The bill makes various changes to the requirements to obtain a state plumbing license. Of interest to cities, the bill provides, among other things, that:

1. Notwithstanding any other provision of state law, after January 1, 2009, a city may not require the installation of a fire sprinkler system in a new or existing one- or two-family dwelling;
2. A city may allow a multipurpose residential fire protection sprinkler specialist or other contractor to offer, for a fee, the installation of a fire sprinkler protection system in a new one- or two-family dwelling; and
3. A multipurpose residential fire protection sprinkler specialist may install a sprinkler system in a new or existing one- or two-family dwelling.

The City of Tomball requested that the League support changing the prohibition against residential fire sprinklers in 2017 (one bill was filed – H.B. 2814 (Oliverson) – to implement that plan, but did not pass), and has again done so for 2019. Nothing passed in 2019 or 2021, although in 2021 H.B. 738 by Representative Paul expanded the prohibition to counties and emergency services districts.

The larger issue of legislative adoption of the International Building Codes appears to be fairly well-settled. Building fees, however, are another story. In 2015, S.B. 1679 (Huffines) was proposed, and would have provided that, when a city adopts procedures to adopt amendments to the International Building Code or any other building code, those procedures must include:

1. The preparation of a cost-benefit analysis of each amendment; and
2. Two public hearings on each amendment.

The bill would also have provided that (1) and (2) must be completed prior to any building code or building code amendment being adopted. The bill passed the Senate but died in the House.

During the 2017 session and 2018 interim, building code restrictions came back aggressively. The regular session saw S.B. 636 (Huffines). That bill, which did not pass, would have:

1. Lowered the population threshold in current law from 100,000 to 40,000 to invoke certain notice and hearing procedures for changes in a city’s building code; 
2. Imposed new requirements:
   1. That a city publish a detailed cost-benefit analysis of a building code or code amendments; 
   2. That would mandate, for an amendment that addresses existing or potential harm to health and safety:
      1. Scientific evidence supporting the probability or likelihood that the harm has occurred or will occur; 
      2. Scientific evidence supporting the probability or likelihood that the amendment will prevent or address the harm.

Essentially the same bill was filed during the special session in the form of 1H.B. 88. That bill also did not pass.

A city is not limited by statute as to the amount the city may charge for building and related permits. Fees vary widely based on several factors, including the number and type of inspections and the sophistication of the city’s permitting process.

The Texas Association of Builders continues to claim that out-of-control city fees are responsible for the rising costs of housing in Texas. In fact, a survey commissioned by TML shows that building and inspection fees constitute only a tiny fraction of a homebuyer’s mortgage payment.

Further, while there is no state statute that limits the amount a city may charge for building fees, court cases have held that cities are prohibited from making a large profit from building permit fees. Under the common-law interpretation of a city’s police powers, which include the power to adopt building codes and related fees, a city cannot charge more than is reasonably related or necessary to administer such powers. If a city does so, the fee may be deemed an unconstitutional tax.

In 2019, H.B. 852 prohibited cities from basing their building permit fees on the cost of a proposed structure or improvement. Specifically, the bill provides that:

1. In determining the amount of a building permit or inspection fee required in connection with the construction or improvement of a residential dwelling, a city may not consider:
   1. The value of the dwelling; or
   2. The cost of constructing or improving the dwelling; 
2. A city may not require the disclosure of information related to the value of or cost of constructing or improving a residential dwelling as a condition of obtaining a building permit except as required by the Federal Emergency Management Agency for participation in the National Flood Insurance Program.

Affected cities should have changed their system as soon as possible. Options include square footage-based fees, a flat fee schedule, or any other non-cost- based and reasonable calculation.

A significant piece of building code legislation passed in 2021 – H.B. 738 by Representative Paul. Of primary interest to cities, H.B. 738 updates the statutory editions of the International Residential and Building Codes to their 2012 versions. For more than two decades, state law referenced the older, 2001 and 2003 edition of those codes. This change means that cities must use at least the 2012 version of the IRC and IBC. The bill also confirms that a city can establish procedures to adopt local amendments “that may add, modify, or remove requirements” set by the codes, but only if the city holds a public hearing on the local amendment and adopts it by ordinance.

Also of note, the legislature passed S.B. 1210 in 2021. S.B. 1210 provides that a building code or other requirement applicable to commercial or residential buildings or construction may not prohibit the use of certain substitutes for hydrofluorocarbon refrigerants authorized under federal law. The bill goes into effect on January 1, 2023.

One bill of interest that was filed in 2021 but did not pass was S.B. 1947 by Springer. This bill would have:

1. Repealed the statute giving a city the ability to reach a written agreement with a building permit applicant providing for an alternative deadline for granting or denying the permit; 
2. Prohibited a city from:
   1. Denying a building permit solely because the city is unable to comply with the 45-day time period for granting or denying a building permit; 
   2. Requiring a building permit applicant to waive the 45-day time period for granting or denying a building permit. The bill was approved by the Senate, but never heard in a House committee.

The TML Legislative Program provides that the League should oppose legislation that would erode municipal authority related to development matters, including with respect to the following issues: 

• Annexation,
• Eminent domain,
• Zoning,
• Regulatory takings,
• Building codes,
• Tree preservation,
• Short-term rentals.

The TML Legislative Program provides that the League should support legislation that authorizes a city council to opt-in to requiring residential fire sprinklers in newly constructed single-family dwellings.

An amendment was added for residential fire sprinklers in remodeled or rebuilt construction. The amendment failed.

5. PERSONNEL: PENSION REFORM
Although many of Texas’ defined benefit (DB) plans seem to be in better shape than the rest of the country, the debate over shifting all government DB plans to defined contribution (DC) plans continues to build momentum. Organizations in Texas such as the Greater Houston Partnership, Texans for Public Pension Reform, the Texas Conservative Coalition, and the Texas Public Policy Foundation (TPPF) are all seeking reforms in public pensions, including advocating for a constitutional amendment against DB plans for public employees.

TPPF issued a report in 2011 calling for the following changes in public retirement systems:

• Freeze the current defined benefit pension plan for all new and unvested employees,
• Enroll newly-hired or unvested employees in a 401(k)-style defined contribution pension
• plan,
• Implement either a hard or soft freeze of the system for vested employees.

TPPF claimed that these changes would have saved the state and local governments considerable money over the long term. The report goes on to add that with government workers now reaping more compensation than their private sector counterparts, taxpayers can no longer afford to subsidize generous retirements. During the past several years, state and municipal pension systems have implemented changes in the hopes of reigning in ballooning liabilities. Modifications like an increased minimum retirement age and readjusted benefit calculations have bought some time for the plans, but in no way have they gone far enough to keep long-term costs at bay.

Public-sector defined-benefit pension plans (retirement packages that promise retirees a set monthly income based on an employee’s salary history and years of service) are entitlements that transfer wealth from workers in the private sector to public sector retirees.

When pension funds fall short of their expected return rates (the case for the past several years), governments must eventually fill the gap by either increasing taxes or reallocating existing revenue. With public workers now making more than workers in the private sector, poorer taxpayers end up subsidizing generally wealthier government retirees.

The report concludes that the changes “would not only shield Texas from an inevitable public pension cost explosion, they would align public sector benefits with those in the private sector and create a more just retirement system.” To counter the efforts of TPPF and others, members of Texas employee pension systems, employee groups, unions, and other related groups benefiting firefighters, police, and municipal employees formed an organization called Texans for Secure Retirement (TSR). TSR’s objectives include retaining DB plans as the primary retirement planning option for all current and future public employees in Texas; educating the business community about the advantage of DB plans for public sector employees, employee groups, and related institutions; and enhancing public awareness about how DB plans for public employees are advantageous for the general public and the economy in Texas.

With so many coordinated efforts to address public pensions, League staff expected a healthy debate on pension reform during the 2013 legislative session. Many bills were filed and a few passed. The following bills passed and were largely related to reporting, auditing, and training:

H.B. 13 (Callegari/Duncan) – Pensions:

1. Requires public pension systems to post the following documents on their Internet websites:
   1. Actuarial valuations;
   2. Annual financial reports;
   3. Member and retiree reports;
   4. State Pension Review Board (Board) registration; and
   5. Reports of investment returns and assumptions;
2. Imposes reporting requirements on the Board if a public retirement system does not post its required financial documents, including:
   1. Posting the names of the systems on its website;
   2. Notifying either the governor and Legislative Budget Board or the political subdivision of the failure, depending on the pension system;
3. Requires the Board to create model ethical and conflict of interest rules for public pension systems to adopt voluntarily;
4. Requires the Board to create an educational training program for public pension system administrators;
5. Authorizes a public retirement system to provide its own educational training to trustees and system administrators if the Board determines that the system’s training meets or exceed the minimum training requirements;
6. Requires a public retirement system to post certain contact information on a publicly-available Internet website; and
7. Requires a public retirement system to submit to the Board an investment returns and actuarial assumptions report before the 211th day after the last day of its fiscal year.

S.B. 200 (Patrick) – Pension Review Board:
This is the Pension Review Board sunset bill. Of interest to cities, this bill:

1. Continues the Pension Review Board until 2025;
2. Authorizes the board to provide training to retirement trustees and administrators;
3. Exempts some fire fighter pension plans from the certain state law requirements;
4. Requires an audit for a public retirement system that is separate from a governmental entity’s general audit;
5. Requires that a public retirement system inform its participants within 31 days of any significant change in the ordinances or regulations of the system that could affect contributions, benefits, or eligibility; and
6. Eliminates certain actuarial valuations for defined contribution plans.

S.B. 220 (Birdwell/Anchia) – Firefighters Pension Commissioner:
Among other things, this bill transfers the responsibilities of the firefighters’ pension commissioner to the Texas Emergency Services Retirement System and the local firefighters’ retirement systems.

S.B. 366 (L. Taylor) – Retirement Benefits:
This bill authorizes a city to:

1. Establish a Roth IRA program for its employees; and
2. Develop procedures to allow retirement plan vendors to lend money to a participating employee.

In the 2015 legislative session, the focus turned on reforming the Texas employee pension systems. Only a few public pension bills were filed and none received a hearing.

In 2016, TPPF issued a policy brief, Restoring Local Control of State-Governed Pension Plans, which examined the fiscal health of the systems and gives recommendations. TPPF acknowledged the difficulty in making substantive changes that are needed to make systems viable when approval must come from the legislature. The brief recommended that the legislature give the localities the authority to govern their own pension systems. Notably, Senator Bettencourt has filed legislation supporting this concept in the 2017, 2019, and 2021 sessions.

In the 2017 legislative session, the legislature largely concentrated on reforming the pension systems of Houston and Dallas, and significant bills were passed affecting those two cities. A few oversight bills were filed but none passed.

In the 2019 legislative session, a few oversight bills passed, as well as an omnibus Texas Municipal Retirement System (TMRS) bill that overhauled the system’s administrative procedures:

S.B. 322 (Huffman/Murphy) – Public Retirement Systems:
This bill provides that:

1. Apublic retirement system, including the Texas Municipal Retirement System, shall select an independent firm with substantial experience in evaluating institutional investment practices and performance to evaluate the appropriateness, adequacy, and effectiveness of the system’s investment practices and performance and to make recommendations for improving the system’s investment policies, procedures, and practices;
2. Each evaluation must include:
   1. An analysis of any investment policy or strategic investment plan adopted by the retirement system and the retirement system’s compliance with that policy or plan;
   2. A detailed review of the retirement system’s investment asset allocation, including:
      1. The process for determining target allocations;
      2. The expected risk and expected rate of return;
      3. The appropriateness of selection and valuations methodologies of alternative and illiquid assets; and
      4. Future cash flow and liquidity needs;
3. A review of appropriateness of investment fees and commissions paid by the retirement system;
4. A review of the retirement system’s governance process related to investment activities, including investment decision-making processes, delegation of investment authority, and board investment expertise and education; and
5. A review of the retirement system’s investment manager selection and monitoring process.

H.B. 2955 (Klick) – Pension Systems:
This bill would, among other things:

1. Repeal various city fire, police, and employee pensions; and
2. Require that each city affected by the repeal to renegotiate its pension system benefits, policies, and procedures with its employees and retirees.

S.B. 1337 (Huffman/Flynn) – Texas Municipal Retirement System:
This bill amends the Texas Municipal Retirement System (TMRS) statute to:

1. Modify current board meeting requirements by:
   1. Removing month-specific meeting requirements;
   2. Allowing the Board to determine when to hold those meetings;
   3. Allowing Board members to participate via video or conference call; and
   4. During meetings called in accordance with the Texas Open Meetings Act, permitting Board members to discuss specific matters in executive session;
2. Incorporate common law liability protections for the Board, staff, and members of Board-appointed committees or the TMRS medical board;
3. Expressly provide protection for acts or omissions made in good faith in the performance of duties for the retirement system;
4. Remove the requirement that the Board-appointed attorney (i.e., the General Counsel) represent the System in all litigation;
5. Clarify that the System may hire additional legal counsel to represent the System in litigation and provide advice on fiduciary and legal matters;
6. Maintain existing confidentiality provisions for member and retiree personal information, but supplement them with provisions in the Texas Public Information Act;
7. Add protection for audit working papers;
8. Provide that final audit reports, unless otherwise protected, are open records;
9. Update the definition of security to better reflect the diversification of TMRS’ investment portfolio;
10. Provide explicit authority to distribute member and retiree annual statements and other information electronically to members and retirees in addition to the current paper and mail formats;
11. Specify that the maximum amortization period for a city’s actuarial accrued liability is 30 years and clarifies the Board’s authority to set amortization periods;
12. Remove the ability of cities to request an amortization period up to 40 years;
13. Establish statutory consistency with Pension Review Board (PRB) guidelines and other Texas statewide retirement systems;
14. Amend prior service credit (PSC) to apply to cities that join TMRS to provide recognition of service performed before the city joins TMRS;
15. Allow a city to choose a PSC rate of zero percent to comply with the Texas Constitution;
16. Eliminate the excluded prior service credit from the calculation of updated service credit (USC);
17. Allow for the recalculation of USC when a person buys-back service and retires in the same year;
18. Remove statutory references to the obsolete disability retirement program;
19. Modernize TMRS’ occupational disability provisions; and
20. Provide TMRS with the authority to request a subsequent medical determination to verify a retiree’s occupational disability and removes the earnings test.

S.B. 2224 (Huffman/Murphy) – Public Retirement Systems:
This bill would provide that a governing body of a public retirement system shall:

1. Adopt a written funding policy that details the governing body’s plan for achieving a funded ratio of the system that is equal to or greater than 100 percent;
2. Maintain for public review at its main office a copy of the policy;
3. File a copy of the policy and each change to the policy with the board not later than the 31st day after the date the policy or change, as applicable, is adopted;
4. Submit a copy of the policy and each change to the policy to the system’s associated governmental entity not later than the 31st day after the date the policy or change is adopted; and
5. Each public retirement system shall adopt a funding policy no later than January 1, 2020.

In the 2021 legislative session, a large focus of the pension debate centered on overhauling the Employees Retirement System of Texas, the pension system for state employees. Another transparency bill passed as well as a bill that allowed retired TMRS members return to work after a one-year break in service without benefit payments suspended.

H.B. 3898 (Anchia/Huffman) – Public Retirement Systems Funding:
Among other things, this bill provides that:

1. An evaluation of the appropriateness, adequacy, and effectiveness of a public retirement system’s investment practices and performance that is required to be conducted by an independent firm must include:
   1. A summary of the firm’s experience in evaluating institutional investment practices and performance and a statement that the firm’s experience meets the required experience;
   2. A statement indicating the nature of any existing relationship between the independent firm and the public retirement system and confirming that the firm and any related entity are not involved in directly or indirectly managing the investments of the system;
   3. A list of the types of remuneration received by the independent firm from sources other than the public retirement system for services provided to the system;
   4. A statement identifying any potential conflict of interest or any appearance of a conflict of interest that could impact the analysis included in the evaluation due to an existing relationship between the independent firm and:
      1. The public retirement system; or
      2. Any current or former member of the governing body of the system; and
   5. An explanation of the firm’s determination regarding whether to include a recommendation for specific evaluation matters;
2. A public retirement system shall conduct the evaluation described by
   1. Once every three years, if the total assets of the retirement system as of the last day of the preceding fiscal year were at least $100 million; or
   2. Once every six years, if the total assets of the retirement system as of the last day of the preceding fiscal year were at least $30 million and less than $100 million;
3. Public retirement system is not required to conduct the evaluation described by
   • If the total assets of the retirement system as of the last day of the preceding fiscal year were less than $30 million;
4. A governmental entity that is the employer of active members of a public retirement system evaluated under
   • May pay all or part of the costs of the evaluation, and the public retirement system shall pay any remaining unpaid costs of the evaluation;
5. The governing body of a public retirement system and, if the system is not a statewide retirement system, its associated governmental entity shall:
   1. Jointly, if applicable:
      1. Develop and adopt a written funding policy that details a plan for achieving a funded ratio of the system that is equal to or greater than 100 percent; and
      2. Timely revise the policy to reflect any significant changes to the policy, including changes required as a result of formulating and implementing a funding soundness restoration plan;
   2. Post a copy of the most recent edition of the policy on a publicly available Internet website;
6. Public retirement system shall notify the associated governmental entity in writing if the system receives an actuarial valuation indicating that the system’s actual contributions are not sufficient to amortize the unfunded actuarial accrued liability within 30 years; and
7. Instances in which the governing body of a public retirement system and the governing body of the associated governmental entity shall jointly formulate a funding soundness restoration plan, including a revised funding soundness restoration plan.

S.B. 1105 (Hughes/Anchia) – TMRS Return To Work:
Among other things, this bill provides that:

1. The retirement annuity of a person who is reemployed by a city in which the employee most recently performed creditable service before the person’s retirement shall not be suspended, provided that the person does not become an employee of the person’s reemploying city at any time during the 12 consecutive months after the effective date of the person’s last retirement from the reemploying city; and
2. If the annuity payments of a person who resumed employment with the person’s reemploying city before September 1, 2021, were discontinued and suspended and the person has not terminated their employment with the city, on the filing of a written application with the Texas Municipal Retirement System (TMRS), TMRS shall resume making the annuity payments to the person, provided:
   1. The person’s retirement that preceded the resumption of employment was based on a bona fide termination of employment; and
   2. The person did not become an employee of the person’s reemploying city at any time during the 12 consecutive months after the effective date of the person’s retirement from the reemploying city.

The TML Legislative program provides the League should oppose legislation that would further erode local control as it pertains to retirement issues.

The TML executive board will meet in December and decide on a final disposition for all agenda items so these may change before legislators convene. In addition, these are items the lobbyist believe will come up this session but not guaranteed. Why are we in TML again?