Houston’s pension plan has a clear path forward

With our pension challenges, Houston has reached a fork in the road, and each day we delay in choosing direction costs us another $1 million.

One path allows us to solve our pension problems once and for all; the other path has us repeating the mistakes of the past. It’s a choice between eliminating $8.1 billion in unfunded pension obligations and capping future costs or laying off hundreds of city employees and cutting services.

The choice is clear, and that is why we are moving forward to obtain legislative approval of the Houston Pension Solution — a plan that is fair, financially sound, budget-neutral and sustainable for the long term. On Monday, this plan won committee approval and was sent to the full Texas Senate for consideration. Next Monday, we go before the Texas House Pensions Committee, and I expect a similar outcome.

The progress we are seeing is historic. Never before have so many different entities been united in the direction forward. Since February of last year, the city has worked with all three employee pension groups to draft a plan that would be fair to our employees and financially sustainable for them and all Houstonians.

In October 2016, all employee pension groups signed off on an agreed set of terms that would reduce the unfunded liability by $2.5 billion through changes in future retirement benefits and cap the city’s future financial exposure. The pension reforms were subject to all three employee groups providing to the city the necessary actuarial data needed to verify the costs — data only the employee groups possess and only they control.

The police and municipal pension systems have provided the data, and as a result, some changes had to be made to the agreed reforms to lower costs.

The firefighter pension board, despite repeated requests from the city since October and similar requests made by state Sen. Joan Huffman on Monday, has refused to make the information available.

In the absence of the data from the fire pension system, we had no choice but to move forward with our own projections about what it will cost to provide future benefits for fire retirees. We have taken a conservative approach with these projections because we have learned from past mistakes. For instance, in 2001, the city agreed to richer benefit plans for all three employee groups, which the city later learned were based on erroneous representations of the cost of these benefits.

To ensure we are using real numbers to analyze and reflect the true costs, I am, once again, asking the fire pension system to give us their information, like the police and municipal pensions have done. If this information shows we are reducing benefits more than is necessary, we can adjust the proposed benefits cuts. You have my commitment to not take more than what is needed to solve this issue.

For the 27 years I served in the Texas Legislature, I was a staunch supporter of our police, fire and municipal workers. I am still a strong supporter, but the status quo regarding our employee pensions is not sustainable. We must have a sustainable, affordable plan, and the only way to do that is to slow down the rate of growth in retiree benefits and for the city to pay the true costs after the reforms are enacted. Note that the proposed changes affect future benefits, not the benefits retirees are receiving today. The size of future checks may not grow as fast, but the amount of checks going out today will not go down. On that, you have my word.

If we don’t make changes, you can add another $130 million to the anticipated budget shortfall for the coming fiscal year. It doesn’t matter who you are, where you live or what your annual income is; every one of us will be adversely affected by the decisions we will have to make to close that gap.

It is due to the decisions of the past that we find ourselves with $8.1 billion in unfunded pension debt today. We must not be in the same position another five, 10 or 15 years from now. We have a path forward that will prevent us from repeating the mistakes of the past. We have unity from diverse stakeholders. Now, we need approval from state lawmakers.