MINUTES SENATE COMMITTEE ON NOMINATIONS Monday, March 21, 2005 2:00 p.m. or upon adjournment Capitol Extension, Room E1.016 ***** Pursuant to a notice posted in accordance with Senate Rule 11.18, a public hearing of the Senate Committee on Nominations was held on Monday, March 21, 2005, in the Capitol Extension, Room E1.016, at Austin, Texas. ***** MEMBERS PRESENT: MEMBERS ABSENT: Senator Jon Lindsay Senator Gonzalo Barrientos Senator Bob Deuell Senator Kevin Eltife Senator Mike Jackson Senator Eddie Lucio, Jr. Senator Jane Nelson ***** The chair called the meeting to order at 3:45 p.m. There being a quorum present, the following business was transacted: The following member arrived after the roll was called: Senator Nelson at 4:00 p.m. At 3:46 p.m., Senator Eltife moved adoption of the minutes from the previous hearing; without objection, it was so ordered. Chairman Lindsay announced that Senator Troy Fraser was unable to attend today's hearing to introduce his constituent, John Graham, Jr., a nominee to the Teacher Retirement System of Texas Board of Trustees. Chairman Lindsay gave a brief introduction of Graham saying that Senator Fraser urged the committee to pass Mr. Graham. The Chair recognized Vice-chairman Deuell to introduce John Mark Henry, Ed.D. Henry recently became a constituent of Senator John Whitmire, who was unable to attend the meeting. Whitmire asked Deuell to perform the honors since Henry used to live in Deuell's district. Deuell also introduced Dory Wiley for Senator Carona who was also unable to attend because of other duties. Chairman Lindsay asked the nominees how long they had served on the board; one a little less than a year , the other two had served slightly over a year. Chairman Lindsay asked, first, if they regarded the TRS as a healthy system and second, to give a general overview. Henry said the TRS is in great shape, it is 91% funded-there is a projected shortfall in the future but plenty of time left to correct. He added that they have an excellent and very diverse staff and that, although he personally did not have the same money background and experience as the other two, he felt he provided the educational expertise needed. Wiley echoed the sentiments about the excellent staff and added that he felt like there was nothing broke in the system, but recognized that there are things that needed tweaking every now and then. Graham said that since he joined the Board, there has been a 9 and 1/2% annual rate of growth, and the system was expanding into real estate. He did mention one big issue which is the cost of healthcare. The chair recognized Senator Lucio who referenced a letter written to the editor of his hometown newspaper by Sylvia Suarez, the legislative chair of TRS- Brownsville saying that the TRS is short by $230 million in appropriations from the state and if the state does not contribute more, retirees can anticipate a 28.5% increase on September 1. Lucio asked for comments from the nominees concerning the letter. Henry agreed with the figures and described some ways to lessen the blow to retirees by giving them an increase of 7% instead of 28%. Wiley explained that when he said things were not broken, he was referring to the investment side. He added that healthcare was beyond the scope of the TRS and the legislature would have to decide. Chairman Lindsay asked about the real estate investments, basically if there would be any more in land acquisitions. Graham answered that they had hired consultants to develop a plan that would be similar to private equity placements. Chairman Lindsay asked what they were looking for, the answer was diversification. The board felt that real estate was a good way to diversify since it was countercyclical to the stockmarket. Chairman Lindsay recognized Deuell who asked the nominees if they anticipated involvement in addressing the problem of dramatically rising healthcare costs. Wiley said that they could make a difference in how they administered healthcare costs, adding that the TRS is a big system with big numbers. Deuell asked if they had heard any complaints about the pharmacy system, the nominees said not at the board level or school level. Deuell said the prescription costs were responsible for driving up most of the costs and gave an example of how MRI's were being purchased by individual doctors to put in offices instead of one MRI being used for an entire group or region. Henry said that the biggest concern of this staff was healthcare. The chair recognized Senator Lucio who agreed with Deuell saying that he took the issue at heart. Lucio stressed that health and safety were the two main concerns of people in his district and that there were people in his district that were dying because they could not afford to live. Chairman Lindsay recognized Senator Nelson who thanked the nominees for their service, then asked if they saw any long term solutions to the problems. Henry said healthcare was a national problem that was much greater than the three of them but that perhaps finding a way to combine retirees with active participants would help. Wiley offered his two cents- he said throwing money at the problem is not a good solution, the situation is messed up and needs to be fixed. Graham added that the problem of costly healthcare translates to all small businesses as well, citing the example of his wife's Fredericksburg business. Chairman Lindsay asked for a motion to vote, Lucio so moved. At 4:08 p.m., by a vote of 6 ayes, 0 nays, and 1 absent, the nominees to the Teacher Retirement System Board of Trustees passed to the full Senate for confirmation. Chairman Lindsay asked for a motion to vote on the non-appearing nominees, Eltife so moved. At 4:09 p.m., by a vote of 6 ayes, 0 nays and 1 absent, nominees from the following entities were recommended to the full Senate for confirmation: Texas Animal Health Commission, Texas Credit Union Commission, Upper Guadalupe River Authority, Guadalupe-Blanco River Authority Board of Directors, Department of Information Resources, Texas Board of Professional Land Surveyors, Texas Commission of Licensing and Regulation, Upper Neches River Municipal Water Authority Board of Directors, Texas Board of Physical Therapy Examiners, Texas Real Estate Commission, Sabine River Authority of Texas, Sulphur River Basin Authority Board of Directors, Board of Tax Professional Examiners, and Texas Private Security Board. There being no further business, at 4:19 p.m. Senator Lindsay moved that the Committee stand recessed subject to the call of the chair. Without objection, it was so ordered. _____________________________ Senator Jon Lindsay, Chair _____________________________ Jazen Wood, Clerk .