State retirees struggle through inflation while budget plans leave them out

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Sandy Smith thought she was doing the right thing.

As a single mother in Austin in the 1980s, Smith chose a life of public service, working for various Texas agencies for four decades. To her, a state job offered the promise of stability plus a solid pension when she needed it later in life. That vision has evaporated, along with almost half of the spending power of the 69-year-old’s monthly pension check.

For Smith, now a retired grandmother in San Antonio, it feels like a bait-and-switch.

“I didn’t want my work to put more money in Michael Dell’s pocket. I wanted to help people. Now it's hard to just afford food,” said Smith, who helps her mother pay for memory care and sends occasional financial support to her grandchildren. Smith is also a board member of the American Federation of State, County and Municipal Employees, Texas Retirees, a union that represents retired public employees.

And any hope that Smith, who drives a 20-year-old car and is on several medications, had of climbing out of financial desperation is disappearing as the clock runs down on the legislative session.

Spending proposals by state budget leaders make no mention of relief for Texas’ 123,000 retired state employees in the next two years — even as lawmakers plan to use billions in surplus cash on pay bumps for almost every other employee in the public sector, including current and retired teachers, and active state employees. The legislative session ends in May.

The state’s retired public servants haven’t had a pension increase in about 20 years.

“It feels like we’ve been left out in a lot of ways,” Smith told The Texas Tribune.

The Texas House is set to debate its two-year budget proposal on the chamber floor Thursday.

While it’s likely to change by the time it’s voted out of the GOP-dominated chamber, the $302.6 billion spending plan includes $1.2 billion for pay increases for current state employees, $3.5 billion for retired teachers and additional funds for a pay raise for current teachers. More is offered in a separate bill that allocates about $5 billion in general revenue for programs to be paid for this year, including extra money for state employees and retired teachers.

The plan, as it stands before the vote, would spend $136.9 billion in general revenue in the 2024-25 budget cycle. The two-year budget proposal also leaves most of a historic $32.7 billion budget surplus sitting unspent in state coffers.

After the Senate passes its own spending proposal later this month, the two chambers will hammer out differences in a conference committee before voting on a final budget bill to send to Gov. Greg Abbott in May.

During floor debate this week, some House lawmakers have expressed support for a potential amendment that would add money for retirees to the bill, but doing so would require siphoning money from another part of the budget, according to House rules.

State Rep. Alma Allen, D-Houston, a retired teacher, is carrying a bill that would create a pension increase for retirees, a proposal she said she may offer up for a vote during Thursday’s budget debate. If it gets added to the House budget proposal, it is likely to be considered more strongly by the Senate or in negotiations between the two chambers.

“It’s really sad, and it’s a serious problem for us because we can’t attract state employees to the game,” said Allen, vice chair of the House Committee on Public Education and a retired teacher. “And those persons who have spent their lifetime working for the state of Texas and find themselves now in a position where they cannot survive, cannot buy food, clothes or shelter? It’s a shameful spot on the state of Texas.”

The smallest ask by the retirees is a 13th check this year or next — an additional one-time payment equal to the 12 other monthly payments the recipient gets each year. Such a plan would cost an estimated $250 million, said Bill Hamilton, president of the Retired State Employees Association of Texas, which advocates for them on several issues.

That’s less than lawmakers have already committed to spending on replacing state fleet vehicles.

Advocates for retired state employees say they are grateful for lawmakers’ commitment to strengthening the Texas Employees Retirement System, or ERS, in the budget, which includes $2 billion in payments to the pension fund in the next two years to stabilize it.

And state retirees don’t begrudge the raises being given to others in the public sector, who they agree are long overdue for a pay increase.

“They’ve gotten behind on active state employees and state retirees for over 20 years. Some people will say they've always been behind on teachers,” Hamilton said. “We know what they’ve put in the budget bills for them [state employees and retired state employees] and we're very grateful for those things. But there's one thing missing, and it's the 13th check for the state retirees.”

Members of the Texas State Employees Union, a separate group, say they would prefer a cost-of-living adjustment such as the one Allen proposes in her bill, which hasn’t been scheduled for a hearing yet. The bill has a cost-of-living adjustment, a one-time supplemental payment and a plan for regular increases in the future. It has no price tag attached yet.

The Senate has backed $4.7 billion in new funding for a bill that gives retired teachers a cost-of-living adjustment for their pensions. If the Legislature passed a bill similar to that for retired state employees, the cost is estimated at $1.8 billion, said Will Rogers, a state retiree and activist with the union.

Retirees say they’ll take both the bonus check and the raise. And right away.

“If people that are on Social Security stayed the same for 20 years, do you think that they would make it? They're not gonna make it,” said Gloria García, 68, a San Juan retiree in the Rio Grande Valley and former clerk for the Texas Department of Health and Human Services.

After bills are paid, García has $450 per month to spend on gas, groceries, personal care, medications, internet, home and care repairs, emergencies and her grandchildren. That includes both her Social Security check and her pension.

At the same time, she makes too much to qualify for state assistance from the Texas Health and Human Services Commission, the department she clerked in for more than 12 years before retiring during the COVID-19 pandemic.

“We don’t get any help at all from the government,” said García, a member of the union. “What about us? What would the state of Texas do if all the state employees would walk out? If they walked out of their jobs, the ones who would suffer are the individuals in need of help from the state of Texas. So please consider the employees and retirees.”

Stretched to the limit 

South Texas retiree Valentina Belmares, 73, is thankful her house in the Hidalgo County town of Alamo is paid off. Her husband gets only a small Social Security payment, and together their expenses are — similarly to García’s — barely covered.

Belmares is so financially stretched that she’s considering whether her $119-per-month internet bill is worth it. (She’s pretty sure it is, though — she needs it for the work she does as a volunteer in her church, she said.)

She grows her own nopales, carrots and jalapeños, and makes her own bread, to save on some of her skyrocketing grocery costs. Her husband, a carpenter by trade who still does odd jobs at age 75, is rebuilding their decades-old fence himself.

Belmares is diabetic, but because her blood sugar seems to be “okay” right now, she isn’t taking her medication. It saves $35 every month.

But she and García exercise for free at the local gym in order to stave off their chances of going into long-term care, an expensive situation facing many seniors that would sink them financially.

“That is really what I am afraid of,” Belmares said.

First: Belmares shows the jalapeños that she makes to sell sometimes. Belmares says that she struggles to make ends meet and sometimes has to sell food plates to supplement her expenses. “I am planning to go to the state Capitol to meet with legislators and representatives for a pension increase since there hasn’t been one in 20 years.” Last: Close friends Valentina Belmares and Gloria García at Belmares’ home in Alamo. Credit: Verónica G. Cárdenas for The Texas Tribune

Rogers, a 77-year-old Austin resident, is worried about it too.

“I think the thing that most concerns me right now is, if one of us has to go into some kind of long-term care, the one of us who is left is really going to have to struggle,” said Rogers, who retired from the Texas Attorney General’s Office in 2003 after working there under four different attorneys general..

Rogers and his wife were doing all right early in his retirement until 20 years went by with his check unchanged. They watched the spending power of their income drop by 38%, according to testimony by state officials before the Senate Finance Committee last May.

The average check for retired state of Texas employees his age is about $1,560 per month.

“I’m feeling much less secure than I did even a couple of months ago. My pension was modest, but it was secure, and it allowed me to feel secure in my retirement,” said Rogers. “But when [gas and electric] prices started going up as they did, it made me rethink how secure I really am. As you get older, there are things that you deal with that you really don't think about when you’re middle-aged or working.”

Long-term care is a huge expense for Leslie Cunningham, a retired state employee in McKinney whose husband is in a $5,800-per-month memory care center, which isn’t covered by medical insurance. His retirement income and the couple’s savings have to cover his monthly care.

Half of her retirement income — that’s pension and Social Security — is eaten up by the rent she pays in the apartment she lives in now to be close to her husband.

The rest of it goes to bills and the day-to-day necessities like food and gas. She also uses some of their savings for those expenses, joking that she might have enough in her 401K to take care of her for the rest of her life — “as long as I don’t live too long.”

“I don’t know what people are doing to survive,” said Cunningham, 78, who retired from the Texas Workforce Commission after 25 years. “You know, honest to God, I don’t know what people do. If a spouse needs long-term care but the couple can’t afford it, the other spouse has to overburden themselves to just completely, completely sacrifice their lives entirely.”

Another fear that leads to both isolation and financial instability: the loss of a partner, their companionship and their financial security.

Austin resident Barbara Fetonte retired in 2011 from the Texas Workforce Commission. She started there as a temporary data entry clerk and worked her way up to being a supervisor. Her husband, a labor union official, got a decent pension when he retired.

In October, Fetonte’s husband died. The first thing Fetonte did, as she grieved the loss of her lifelong partner, was disconnect the telephone landline. Cable and charitable donations went next.

And then Fetonte, 70, took a part-time job at the front desk of a local YMCA.

“I don’t want to live paycheck to paycheck,” she said. “I did that as a kid. I did that when my family was young. I didn’t like that. I didn’t like being in the grocery line having to put stuff back after it was all added up and I didn’t have enough.”

State employees easy to overlook  

Hamilton said he suspects that the biggest reason the retired state employees are being overlooked is that they have spent their lives toiling in largely invisible roles: behind desks at the driver’s license offices, in data entry at the unemployment office, in dental assistance at state health clinics or as ticket-takers at state parks and museums.

“There are just not a lot of romantic stories about state employees,” Hamilton said.

The public may not fully appreciate their contributions because they are such a ubiquitous part of daily life and government that most people take for granted, Hamilton said.

“By and large, state employees are committed to long-term public service, willing to count on a secure retirement,” he said.

In the past, arguments for a raise were rebuffed by the fact that the state’s Employees Retirement System was not actuarially sound after years of lower-than-required legislative payments into the investment fund, said Hamilton, who was a budget official for three Texas governors.

After lawmakers began paying more into the fund in 2021, with plans to do it again this cycle, the fund is expected to be sound in the next two to three years, state budget leaders said recently.

Lawmakers also overhauled the 70-year-old pension system two years ago. Now, state employees hired after September 2022 won’t get the same pension that the current retirees are taking. A new law enrolls them into a cash balance plan that allows gain sharing by employees — similar to Texas county employees’ benefits.

Because the state employees retirement system is just now on the road to being restored, Hamilton said there may be hesitation among lawmakers to make a long-term commitment in the form of a cost-of-living increase.

There is also the added complexity of having to change current law. As it stands now, lawmakers can only propose a one-time maximum 3% (or $100 per month, whichever is lower) cost-of-living adjustment for those state workers who have been retired for at least 20 years — and it can only happen if ERS risk managers say the fund is healthy enough to handle it. That mostly likely won’t happen before 2025, Hamilton said.

Only about 30% of the state’s retired employees would qualify for the one-time increase — and it wouldn’t help most of the people who need it, Hamilton said.

There’s a better chance, he said, for lawmakers to approve one extra monthly check this year — the equivalent of 8.3% of a year’s salary — and then circle back to the permanent raise next time after the fund has been stable for a few more years.

“A 13th check for all retirees soon would partially blunt some of the recent inflation,” Hamilton said. “Admittedly, it wouldn’t be enough to overcome 20 years of lost buying power, but it would at least be a legislative recognition of the history, while it’s doing something similar for our well-deserving teachers.”

But some say one extra monthly payment doesn’t go far enough, fast enough.

“A 13th check does not impact your life at all,” said Allen, who estimates that her own retirement income is around $40,000 per year. “It doesn’t say thank you for dedicating your life. What’s a retiree going to do with $1,500?”

For Belmares, the senior in the Rio Grande Valley, a 13th check would increase her average monthly income by just over $100 per month for one year.

Most state retirees literally cannot afford to wait two more years for relief, said Rogers, the retired Texas Attorney General’s Office employee in Austin.

“Those people are really hurting right now,” Rogers said. “I’m afraid if we don’t try to get some kind of cost-of-living adjustment this time, the money won’t be available in two years. People’s priorities will change.”

Lawmakers have the money and the ability to change the law and not even touch the retirement fund — using a portion of the state’s surplus or rainy day fund instead — to give state employees a boost along with all the other public servants likely to see one this session, Rogers said.

“I don’t want to criticize any of the other organizations and what they’re pushing for,” Rogers added. “But we should be looking at a solution that provides a decent cost-of-living adjustment for all state retirees, and as soon as possible.”

Disclosure: Dell and Texas Department of Health and Human Services have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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