Transparency part I – Texas Legislator Pay

I have a civics quiz for Texans: Do you know what your state representative or senator gets paid?

If you answered with the official $7,200 salary per year — only five states pay less — you only get partial credit.

If you added in the $190 per diem for 140 days while the Lege is in session every other year — which can add up to $13,300 per year — you’re getting warmer.

TX Capitol Building

To find the real answer, you have to understand the fine print of their pensions, following retirement from the Legislature.

We’ll get to all that, but first, let’s acknowledge their pay is too low.

The five states with lower legislator salaries than Texas — New Mexico, New Hampshire, South Dakota, Vermont and Wyoming — have tiny populations. Houston and its surrounding suburbs have a higher population than those five states combined. In terms of budgetary power and economic decision-making by the Legislature, the low salary of Texas lawmakers makes little sense.

We all seem to be getting a deep discount on Texas legislators. I don’t think that’s a good thing.

When you systematically underpay, you often get one of two results, or both. Either you attract only wealthy people for the job — not a perfect result — or you attract people seeking to take financial advantage of their position — an even worse result. I think people should be paid fairly, in a straightforward way.

The lack of straightforwardness is the real problem in Texas.

So now we have to dig a bit deeper into how lawmakers get paid by unpacking the myth, the Texas Constitution and the reality.


First, the myth. This probably derives from some Jeffersonian ideal in which the gentleman rancher unbuckles his spurs, wipes the mud off his boots, and joins the august and deliberative bodies in Austin for four months every two years. In that world, which no longer exists — if it ever did, which it probably didn’t — pay is irrelevant to that rancher who derives his true living from the rich soil on the banks of the Brazos.

What TX Legislators would like you to picture: The Gentleman Rancher-Legislator

Second, and more important, the Texas Constitution clearly states that pay raises for legislators must go to a public vote. Strategically speaking, lawmakers avoid making themselves an easy target for cranky Texans wanting to vote their displeasure with Big Gummint. As a result, lawmakers’ salaries stay low to avoid the risk of a public spanking.

Third, and here’s the real point, legislators are often paid quite generously, just in a roundabout, somewhat-hidden-from-voters kind of way.

You see, their real compensation is in the friends they make and the heartwarming lessons they learn along the way. Just kidding — that’s the moral of my imaginary children’s novel.

The Reality

Their real compensation is their pension, which is tied to the salary of state district judges, currently $140,000.

To be more specific, legislators qualify for guaranteed annual pension payments of 2.3 percent of $140,000 for every year served. They can also accrue years of service in other state pension systems, as well as for military service.

So, for example, eight years in the Legislature qualifies a retired state lawmaker for a guaranteed pension of $25,760 per year for life, starting at age 60. A 60-year-old woman has an average of 24.5 years of life remaining. By making some assumptions, including a 3 percent discount rate, a finance guy like me calculates that guaranteed annuity is today worth $436,259.

The financial deal is better if the legislator starts serving at an earlier age and retires earlier as well.

A 50-year-old man with 12 years of service in the Legislature could retire with a guaranteed $38,640 per year. Because, again, that’s 2.3 percent times $140,000 times 12. With a life expectancy of 29.6 years and a 3 percent discount rate, the 50-year-old former lawmaker could receive payments over the next 29 years with a present value of $816,534.

These aren’t outrageous windfalls, and I’m not saying it’s undeserved pay. But it’s not nothing, either. It’s fair pay — just paid after retirement rather than during service in the Legislature.

The ingenuity of tying retirement pay to state district judge pay is twofold. If legislators want to give themselves a pay raise in retirement, they just raise the salaries of judges, which they did in 2013 when they bumped them to $140,000 from $125,000. Second, that pay raise doesn’t have to go in front of Texas voters as the constitution mandates. Sneaky!

My main objection is that we end up with a myth of the citizen/legislator, without acknowledging this is a full-time job that requires full-time pay. Also, we should be able to look at a salary and understand what folks are actually paid.

In my view, the system isn’t necessarily overly generous — it’s just opaque. Opacity serves legislators well but the public poorly.Finally, since my kids go to public schools and public school teachers always go begging for more funds, I have a bomb-throwing legislative proposal for this session: Instead of tying legislator pensions to state district judge pay, we should tie their pensions to teachers’ salaries. Can we all take a moment to imagine what would happen?

This post previously ran in the San Antonio Express News and Houston Chronicle.

Please see related posts:

Transparency Part II – Income Taxes

Transparency part III – Salary Transparency

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Public Speaking


I founded Bankers Anonymous because, as a recovering banker, I believe that the gap between the financial world as I know it and the public discourse about finance is more than just a problem for a family trying to balance their checkbook, or politicians trying to score points over next year’s budget – it is a weakness of our civil society. For reals. It’s also really fun for me.

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