Pension bill goes to Abbott

Turner cheers approval of plan seen as cornerstone of his agenda

The Texas House sent Houston’s pension reform package to the governor’s desk Wednesday, marking what Mayor Sylvester Turner hopes is the beginning of the end of a 16-year fiscal crisis, and giving him a landmark achievement in his second year in office.

Turner, who has made passing the reforms the centerpiece of his tenure, alternated between grins and gravitas Wednesday night. He cheered the bill’s passage, but also warned that more work lay ahead, a clear nod to a series of referendums looming this fall.

“There is no challenge that this city cannot address, no mountain we cannot climb if we stand together,” the mayor said, flanked by dozens of police and municipal workers, civic leaders and senior aides.

“Houston now has its pension reform, landmark legislation that puts us on a much more stable course. This is historic, this is major, this is just the way Houston does it, and I could not be more proud to be the mayor of this city.”

Still, Turner said, even the Legislature’s strong approval — more than two-thirds of both chambers supported the measure, meaning it will take effect July 1 — was only the “first lap” in a longer race. Turner plans to ask Houstonians this fall to lift a voter-imposed cap that limits what the city can collect in property taxes, and may also have to finesse two pension-related votes.

Voters must approve the $1 billion in pension bonds that were central to Turner’s talks with the police and municipal funds, or much of the $2.8 billion in benefit cuts the mayor negotiated will be rescinded. Conservative activists also have submitted a petition that could force a vote on whether to give future city employees 401(k)-style pensions, which labor groups view as providing insufficient retirement security.

The reform deal also must survive a promised legal challenge from firefighters, who have opposed the reforms and did so loudly Wednesday at the Capitol.

As Rep. Dan Flynn, who chairs the House pensions committee and carried the bill in that chamber, laid out the legislation, a spectator in the firefighterpacked gallery shouted “Lies!,” drawing boos from some lawmakers.

After the 103-43 vote, as retired firefighters in red T-shirts filed out of the gallery, they offered more sustained jeers, prompting Rep. Dennis Bonnen, the Republican from Angleton who was presiding over the chamber, to slam the gavel and remind them outbursts were against House rules. Some retirees then gathered in the Capitol rotunda, huddling over a list of how members had voted and vowing to visit the offices of bill supporters.

“We’re disappointed in the outcome because this is unfair,” said David Keller, who chairs the firefighters’ pension board. “Obviously, litigation is one of the options we’ll have to explore, along with the 2019 session and any other option that comes forward. Now we’re at the point where we have to uncover what the next move is.”

Effects of pension problems

Whatever looms ahead, it is hard to overstate the extent to which Houston’s pensions crisis has come to dominate municipal politics — from recent mayoral elections and City Council budget debates all the way down to civic club meetings — and the disbelief many at City Hall feel at long-discussed reforms actually coming to fruition. Gov. Greg Abbott has not issued a public statement on the bill, but City Hall officials expect him to sign it.

Public officials confronting worker demands for higher pay and better equipment or citizen demands for better services seemed always to wind up at the same answer: Pensions. Rising pension costs, gobbling up the dollars that would otherwise go elsewhere.

It has been a convenient fallback, but not an invented one. Two credit ratings agencies downgraded Houston last year, with spiraling pension costs their chief concern. A Moody’s study showed only three cities put a larger share of their revenues toward pensions than Houston.

Granted, Turner’s reform package is not intended to provide a mountain of cash overnight. In fact, what the city puts toward pensions from the general fund might even increase slightly.

But, rather than throwing hundreds of millions of dollars into an ever-deepening hole, the reforms are intended to provide a permanent fix by cutting retiree benefits by $2.8 billion, recalculating the city’s payments to erase its $8.2 billion in pension debt over three decades and capping the city’s future pension costs.

“This is a new day, a new beginning for the city,” said Bob Harvey, CEO of the Greater Houston Partnership, which several years ago made pension reform its top civic priority.

City’s ‘most critical issue’

Of course, Houston still will carry at least $4 billion in pension debt after the reforms take effect, and that will take decades to pay off. It also will take time to reverse the erosion in city services caused by 16 years of spiraling pension costs eating up dollars that would otherwise have gone to services.

Houston employs fewer police officers than it did 15 years ago to patrol a smaller city. City parks are mowed less regularly. Houston has deferred hundreds of millions of dollars in facility maintenance, and replaces police cruisers, fire engines and trash trucks less often. And then there are the citizen complaints about flooding and potholes and stray dogs and illegal dump sites.

“This was and continues to be the most critical issue facing the city of Houston,” said City Controller Chris Brown, Houston’s elected financial watchdog. “By passing this Houston pension solution, the Texas Legislature has helped us avert a financial crisis that could have crippled the city for years to come.”

‘It’s been a collective effort’

Houston’s pension crisis began when benefit increases enacted between 1997 and 2001 led costs to spike rather than increase slightly, as flawed studies had projected. In response, former mayor Bill White negotiated benefit cuts with the police and municipal pension funds in 2004, and again with municipal workers in 2007. Those boards also let the city pay what it felt it could afford, rather than the amount needed to fully fund benefits each year.

Those decisions helped created the city’s $8.2 billion in pension debt, and meant that, despite White and his successor, Annise Parker, pouring hundreds of millions of dollars into the pensions, the city’s rising payments kept falling short of what was needed to prevent more debt from piling up.

Knowing the police and municipal groups wouldn’t negotiate further changes without the firefighters taking their first round of benefit cuts, Parker repeatedly tried and failed to get the Legislature’s help in opening a negotiating channel with the fire pension board.

Shortly after taking office at the start of last year, Turner — who spent 26 years in the state House — sat down with representatives of all three funds and fostered an air of inevitability: I’m a friend of labor, he said, but the pension system is unsustainable and must be fixed in the upcoming legislative session.

“For a pension reform bill, not just short-term but longterm, to pass out of the Senate by more than a two-thirds margin and to pass out of the House by more than a two-thirds margin, that’s incredible,” Turner said Wednesday. “But it’s been a collective effort.”