Gramm’s proposal calls on the state to buy life insurance policies and annuities on thousands of retired teachers. He said the state could cash in those policies to close a $700-million funding gap in theTeacher Retirement System of Texas pension fund, according to an Associated Press report.
The plan, backed by Republican Governor Rick Perry, was set in motion after a recent meeting betweenGrammand Perry at the governor’s mansion. Retirees would be told they were being insured, with the money going to the agency.
The teachers’ pension, which provides pensions and health insurance for retirees, is in the red and needs to generate an additional $5.2 billion, through investment gains or increases in employee contributions, to cover all future retirees. Officials said the fund’s health care portion has enough money to pay all claims during the current budget period but could face fiscal problems in the future.
Not surprisingly, Gramm’s plan has it detractors. Critics want to know how much of the money would go into the retirement program.
State Employees Retirement System spokeswoman Mary JaneWardlowtold the AP that the agency was skeptical of a similar proposal launched earlier because no one could explain how it would work to the agency’s satisfaction. “From what we did know, it’slike, how do you insure a group of older people … and then turn around and make money off of it when they die,” she said. “It just didn’t seem to wash.”
“This is a joke, right?” asked Mike Crouch, spokesman for the Association of Texas Professional Educators. “The state wants to benefit from dying teachers? This can’t be for real.”
Other state pension administrators question whether the big beneficiaries would be Gramm’s investment firm – Gramm is now vice chairman of UBS Investment Bank in New York – and other companies involved in financing the deal.