AUSTIN – On Sept. 6 the Office of the Texas Attorney General issued an opinion finding that a court would likely conclude the state is not required to assume liability when a municipal retirement system is unable to meet its financial obligations.
On March 10 State Rep. Jim Murphy, Harris County, requested Attorney Gen. Ken Paxton’s opinion on the matter.
“Rising pension and healthlcare costs, unpredictable revenues, aging infrastructure, high debt load, and increasing costs for the delivery of city services threaten municipalities' ability to balance budgets and maintain strong credit ratings,” the representative writes in his request.
“When these challenges put municipalities at risk for defaulting, does the oversight role played by the State Legislature in these specific municipal retirement systems cause the State to assume some or all of the liability?"
Murphy specifically asked if a municipal retirement system fails to meet its obligation, is the state then responsible for ensuring that agreed upon payments are made.
“With respect to the size of these pension systems and their impact on city budgets, and the role played by the State Legislature in their creation and maintenance, it is imperative that the Legislature have a clear understanding of the consequences of decisions made in regards to these municipal retirement systems,” the request states.
In his opinion, Paxton found the state’s constitution prohibits the creation of debt, except in “limited circumstances not present here.”
“In no instance does the constitution or the Legislature make the State liable for any shortfalls of a municipal retirement system regarding the system's financial obligations under title 109 (of the Texas Civil Statutes),” the opinion reads.
“The Texas Constitution would in fact prohibit the State from assuming such liability without express authorization.”
As of 2015, Texas has 13 local retirement systems specifically enabled by state statute (title 109).