HFD still skeptical about pension reform

In continuing debate, mayor ‘will not accept’ attempts to derail the landmark agreement

Houston’s firefighters’ pension board is expected to discuss and, perhaps, take a second vote on Mayor Sylvester Turner’s landmark pension reform deal next week, underscoring the group’s continuing wariness of the proposal as it reaches the newly convened Legislature.

The fire pension board joined the police and municipal boards in agreeing to the reform framework in October but did so in a tortured discussion in which members stressed several caveats, among them a plan to vote again once the agreed terms were turned into legislative language. Such a vote could come as early as Tuesday.

Turner kicked off Wednesday’s City Council meeting by stressing the importance of securing legislative passage of the reforms and — without mentioning any person or pension fund directly — also issued a warning to those who might try to impede that passage.

“There may be some out in the universe saying that you’re going to keep what you have got,” Turner said. “I want to give due notice: It is totally unrealistic to expect you can keep what you have received for the last 15 years and fix this problem. If anyone attempts, for example, to undo, unravel, you will get less than what you have asked for.”

After the council meeting, Turner said lawyers at the Capitol now are drafting bills based on language produced in the city’s negotiations with the police and municipal funds. It is unclear, however, how close the sides are to final language on the fire reforms.

The mayor said legislative counsel have been provided only with the firefighters’ October term sheet, and city sources say fire pension leaders have moved slowly and raised repeated concerns throughout the negotiations. Some fire representatives even traveled to Austin a month ago to discuss those concerns with key legislative staffers.

Among the outstanding issues, fire pension board chairman David Keller wrote in a Jan. 3 letter to members, are ensuring

that the legislation leaves the city no wiggle room to underfund the pension in the future, and clarifying a key provision that would cap the city’s future costs and force further benefit cuts if, for example, the fund’s investment returns tanked.

“There are,” he wrote, “a number of complicated issues to be worked out before it can be said that an agreement or ‘deal’ is reached.”

Keller did not return calls for comment this week, but a Thursday morning email from the fire fund informed members that a special Friday meeting to discuss the reforms had been canceled, explaining the decision by stating that the week had “failed to yield new developments.”

Nick Salem, who heads a firefighter retiree group, said he visited with lawmakers in Austin this week and told them the city is “reneging” on the October terms by not giving pension officials sufficient say in the bill drafting.

“If the city doesn’t change this language, there won’t be a deal,” said Salem, who has not seen the proposed bill but has spoken with fire pension leaders. “We want to be in the bill-supporting business, but if our pension can’t agree to it, you’ve got to be ready for the fight.”

‘Moving forward’

Salem and city sources said they anticipate the pension fund delaying action or voting no Tuesday, though Turner indicated that might not shift his plans much.

The mayor said he takes the three pension boards at their word, as stated in their October votes to proceed with the reforms, and said the city has dealt consistently and in good faith with all three groups.

“Let me be very clear: We are moving forward. There’s no veto here at all,” Turner said. “We all recognize in every legislation there are adjustments you make along the way. But we are moving forward. What I will not accept is any attempt to derail or substantially modify this agreement. There is going to be a pension reform measure for all three.”

State Rep. Dan Flynn, R-Van, who chairs the House pensions committee and plans to carry the reform bills, said he remains open to working with the city and its firefighters to put the funds on sound footing. He joined Turner in lending an air of inevitability to the talks, repeating his warning that those hoping to lean on the Legislature for a solution may come to regret that decision.

“You know how negotiations go — everybody is throwing out what they want, their wish list, and then we try to bring some clarity to what can be done,” Flynn said Friday. “But it’s not an option to do nothing, and ‘no’ doesn’t solve problems. We anticipate going forward.”

Growing debt

Turner’s reform plan assumes more realistic investment returns, which would hike the city’s pension unfunding to nearly $8 billion, and drive up the city’s annual pension payment. To bring that cost back down, the funds would cut benefits by $2.5 billion, and Turner would issue $1 billion in bonds and inject that cash into the two worst-funded pensions.

Language ensuring the city cannot short its payments is a particular flashpoint for the fire pension because that group is in the best financial shape of the city’s three pensions, thanks to state law forcing the city to make its full annual payment to the fund.

The city, by contrast, rarely has made full payments to the police or municipal funds after 2001 benefit changes led costs to skyrocket. Those inadequate payments helped create a stillgrowing debt, which was left unsolved by 2004 and 2007 reforms to current and future workers’ benefits.