Houston Pension Reform Moves Closer to Approval

HOUSTON (CN) – A pension-funding crisis that has plagued Houston and raised the specter of job cuts is close to being resolved, as the Texas House will vote Saturday on a reform package that Houston’s mayor says will pay off the debt in 30 years.

The Texas Legislature must pass legislation to ratify Houston Mayor Sylvester Turner’s plan to eliminate the city’s $8 billion in unfunded pension obligations because state law governs how much the city pays into its municipal worker, police and firefighter pension funds.

Turner’s plan cleared one hurdle Monday with the Texas Senate voting 25-5 to approve it. The 150 members of the Texas House will vote on it Saturday morning. Though it is expected to pass the lower chamber, Turner told city officials on Wednesday he’s traveling to Austin, the state capitol, on Thursday to make his case to lawmakers.

Turner said the city would lay off up to 2,200 city workers if the pension-reform bill isn’t approved by the Legislature and signed into law by Gov. Greg Abbott.

Turner, an African-American Democrat, served in the Texas House from 1989 until January 2016 when he took office as Houston’s mayor, so he is familiar with the glad-handing needed to win over lawmakers.

“We certainly want to send a shout out to all 150 House members. They are the greatest people. In the State of Texas the House is just a tremendous chamber and we have the utmost respect for the House members. And they’re all terrific so I’m asking them to cast a positive vote for the Houston Pension Solution on Saturday,” he said Wednesday at a City Council meeting, sarcastically sucking up to the state legislators.

Turner’s package calls for current municipal workers, firefighters and police officers to give up $2.5 billion in retirement benefits and for the city to issue $1 billion in pension obligation bonds.

Turner announced the deal last September with the support of the city’s municipal employee and police pension funds. The firefighters’ fund initially withheld its support, but its board voted the following month to endorse the plan.

The reforms include a mechanism to take the city’s three pension funds back to the negotiating table if the city’s pension bills get too expensive.

“We are limiting the amount to be spent each year for pension benefits. If anticipated costs rise above this limit, the city and the pension systems will have to return to the table to make adjustments to bring costs back in line,” Turner said in a statement.

According to Turner, the proposal will not raise Houstonians’ taxes or decrease pension payments for retirees, but active employees could see a reduction in cost-of-living raises or a slowdown of the rate their retirement benefits accrue.

The plan passed the Texas Senate after language was added to ease concerns of Sen. Paul Bettencourt, R-Houston, who served 10 years as Harris County’s tax assessor-collector and owns a tax-consulting business in Houston, Harris County’s seat.

Taking lessons from pension debt that bankrupted Detroit in 2013, Bettencourt has stated that guaranteed retirement benefits, like those paid by Houston’s three pension funds, are not affordable.

He considered offering an amendment that would let Houston voters force 401(k) plans on new city employees, which would be much cheaper for the city because pensions are paid by the employer, while employees pay the bulk of retirement funds placed in 401(k) plans.

But Bettencourt decided not to propose the changes after language was added to the bill that established a route to “cash balance” plans, which are cheaper for employers than traditional pension plans, the Houston Chronicle reported.

Dallas has similar pension-funding issues and the city is also trying to get reforms passed in the Texas Legislature before it adjourns on May 29. It will reconvene on Jan. 8, 2019.

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