Voter input on pension reform is the right move
We can all agree that the time has come for real reform to Houston’s public retirement systems. Mayor Sylvester Turner should be commended for his hard work and for bringing everyone to the bargaining table. However, I respectfully disagree with his assertion that giving voters the decision to issue pension obligation bonds (POBs) is a “poison pill” for reform. As to the Chronicle’s accusation (“Pension teamwork” Page A31, Feb. 19) that I am trying to “weigh in from the sidelines” to make some deals of my own: As author of the bill that would allow the city of Houston to reform its public retirement systems, as Chair of the Senate committee with jurisdiction over pensions, and as one of 31 senators who will cast a vote, it is my duty to weigh in on the issue. I disagree with the Chronicle’s implication that the $1 billion bond obligation is too important to be entrusted to the voters.
We know that the bonds are not absolutely necessary to make the economics of the city’s reform plan work. In fact, the mayor has already recognized the possibility that the city would not be able to issue the full promised POB amount: The city’s draft bill language submitted to me already includes a provision that adjusts the “corridor” based on the timing and amount of POBs. (The “corridor” places a cap on future city contributions and requires additional benefit reductions if costs rise above that cap.) Although the POBs proposed do not create new debt, it is important that voters have input, as issuing bonds creates some budget risk for any government entity, and bonds could possibly be ripe for abuse by their
issuing authority.
Before the city doubles existing POB obligation, there should be some widespread agreement. Like many of my constituents, I feel that is it prudent and fiscally responsible to provide taxpayers the opportunity to voice their opinion. The bottom line is, even if no POBs are issued, the reform plan still works and is a big step forward for the city of Houston.
I realize that putting POBs before the voters is being met with resistance. I don’t know what the agenda of others may be. Mine is only to give voice to the voters. POBs are not essential to the reform plan’s success; however, without the other elements of the mayor’s reform plan, the financial cost to Houston would be at least $2.5 billion and the tab would have the potential to go much higher. We cannot allow this one issue to ruin what may be Houston’s last and best chance at reform.
The problem of under- funded pension systems has developed over many years with many different causes. It has been facilitated by elected former mayors and council members who promised lavish benefits with questionable actuarial analysis, by politics driving benefit and funding changes, and a chilled investment climate. These big promises have gotten the city into a precarious position that could severely affect workers and taxpayers. Those who have begged for reform for many years have been shut down; every time there was a push to change the system constructively, the pension systems deemed the effort a non-starter. Even minor plan design reforms in the last decade and reasonable benefit reductions were hard-won and ultimately merely kicked the can down the road.
The plan now under consideration gets the city on more sound financial footing, but the reforms don’t need to stop there. Further reforms are in play this legislative session. I have filed Senate Bill 509 and Senate Bill 936, which would create transparency, require audits of all public pension systems in Texas, and mandate careful study by members of the House and Senate on whether or not the state should move pensions to defined benefit, defined contribution or other plan types.
It is important to understand that some public retirement systems in the state are more ripe for reforms than others, and I firmly believe that promises made to employees should be kept.
I continue to be committed to this reform. The Legislature will be working with the mayor and others to facilitate a solution that all interested parties can be proud of. I realize that no single person or entity gets to control this solution — the outcome belongs to the mayor, the retirement systems, the city, the Legislature, and, most important, the taxpayers.