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By Kate Alexander, Robert Elder
Tuesday, October 07, 2008
As the stock market shed 3.6 percent of its value Monday, Gov. Rick Perry talked up the Texas economy before sitting down with some agency chiefs for a "frank discussion" about the implications of the national economic turmoil for the state.
"I'm very pleased to say that our state's economy is better suited than just about any other state to weather this financial crisis," Perry said Monday during the meeting at the Capitol.
It is a message that state officials have often proffered since the economy took a turn for the worse a year ago.
Perry, however, added a note of caution. "As strong as our economy is, it is still interlaced with the economies of other states that are in substantially worse condition than we are," Perry said.
The Texas economy is growing but at a slower pace than in recent years, the Federal Reserve Bank of Dallas reported last month. Culprits include high commodity prices and the ongoing credit crisis. Employment in Texas grew at a modest 1.4 percent annualized rate in August, and residential real estate and construction continue to flounder. Exports remained strong, however, thanks to the decline of the dollar, and oil and natural gas prices remained high enough to keep the energy business humming.
Dick Lavine, senior fiscal analyst for the Center for Public Policy Priorities in Austin, said no one can be certain how the Texas budget next year might be affected by national conditions. For instance, the state might have to put more money toward children's health insurance and Medicaid because the federal budget is being stretched thin, he said.
"Looking backward, things were going great," Lavine said. "But going forward, we're driving into the fog." Ronnie Jung, the executive director of the $105 billion Teacher Retirement System pension fund, was one of the agency chiefs who met with Perry.
Other leaders who attended the meeting were Ann Fuelberg, executive director of the Employees Retirement System of Texas, the $22 billion pension fund for state workers; and Holland Timmins, chief investment officer of the Permanent School Fund, the state's $24 billion endowment for public education. Jung later held a previously scheduled conference call for TRS members and told them that benefits "are not directly impacted by the day-to-day market swings" that garner the headlines.
Jung said the system, which serves 1.2 million active and retired members, is a defined benefit plan whose benefits are determined by age, years of service and salary.
"In the long run, investment returns are critical to a sound retirement system," Jung said. He said he thinks that the Teacher Retirement System's investments are broadly diversified and won't be too damaged by the current market turmoil.