It’s city business
State politicians stand in the way of City Hall tackling pension problems.
The 84th Legislative session is in full swing in Austin. From now until June 1, our elected officials have the job of addressing some deeply important state issues, such as criminal justice, education, infrastructure and health care. They will also address some less important issues, such as the official state hat. For Houstonians, there is one city-specific issue that we will need state legislators to tackle: the Houston Firefighter Pension System. Unfortunately, the hometown delegation in Austin has made it rather clear that they aren’t going to touch the pension mess.
As Houston state Rep. Garnet Coleman was quoted last week: “We’re not going to do anything or move anything that doesn’t have an agreement.” (“City Hall, Harris County hope Legislature won’t rule out their priorities,” Page A1, Tuesday). The senior Democrat’s sentiment was echoed by half-a-dozen other area legislators.
Whether they decide to act, state legislators can’t escape their role at the core of the pension fight.
In addition to employee contributions, the firefighter pension is funded by tax dollars collected by City Hall. However, City Hall can’t set the amount it is obligated to pay. State law creates a framework that dictates what Houston taxpayers owe. Local tax dollars should be controlled by the elected officials at City Hall, but that isn’t what Democratic state Sen. John Whitmire thinks.
“Do you really want [Council Member Michael] Kubosh to be in charge of a $3 billion fund?” Whitmire asked the Chronicle editorial board during the past election season. “Do you want [Council Member] Dwight Boykins to be in charge of a $3 billion fund?”
Yes. In fact, that’s exactly what Houstonians elected them to do. City officials control the city budget.
Pensions were put in Austin’s hands to remove it from the swings of city politics. That well-intended move, however, has allowed a chunk of the city budget to become a matter of state politics instead of a municipal concern. Budget watchdogs who would normally view public pensions as a matter of fiscal responsibility instead treat it as a fight between Mayor Annise Parker and Todd Clark, chairman of the Houston Firefighter’s Relief and Retirement Fund. Meanwhile, City Hall’s budget writers are stuck sliding down a fiscal cliff that grows steeper with every passing year.
Austin representatives say they won’t step in to help until the city reaches an agreement with firefighters. However, this cautious attitude isn’t likely to work, because firefighters have little incentive to negotiate. A poorly considered benefit increase in 2001 gave firefighters a pension plan far beyond what police and municipal workers currently have. For example, unlike police officers and municipal workers, overtime is counted as part of a firefighter’s salary when calculating pensions. The Deferred Retirement Option Plan (DROP) also allows firefighters to start collecting pensions before they retire, directing payments into a bank account that pays out when they stop working. Most firefighters who retire after 30 years will receive for life about 70 percent of their ending salary, plus a lump sum payout from the DROP account of $700,000 to $1 million.
What reason do firefighters have to give that up?
The mandated payments from the city have also ensured that the firefighter pension has a better funding ratio than the other two pensions.
The problem is that firefighters are benefitting in a way that cuts into the rest of Houston’s city services. Last year, state law mandated that Houston pay $91.2 million into firefighter pensions. This is more than Houston spends on libraries, parks or trash collection. The single-largest expense growth in the mayor’s 2015 general fund budget was a 21 percent hike for the city’s three pension funds. With a city revenue cap in place, every dollar spent on firefighters’ impressive pensions essentially diverts a dollar that could be spent fixing roads or paying down debt. The burden of covering pension costs also discourages the city from hiring new firefighters or raising base pay.
Clark’s solution to the pension problem is simply for the city to raise taxes.
“The best thing you can do is just come up with the money,” he told City Council last year. “It’s not my job to balance the city’s budget.”
Exactly. That’s City Hall’s job, and politicians in Austin won’t let them do it.