Mayor aims to fully fund Houston's pension plan within 30 years
'The current system is not sustainable,' Turner says
HOUSTON – Houston Mayor Sylvester Turner announced Wednesday that he is putting forth a plan that will eradicate the liability of the city’s cash-strapped pension plan within 30 years.
Turner said his budget-neutral plan will ensure that the city’s system, which pays pensions for police officers, firefighters and municipal workers, is fully funded by 2046.
The governing bodies of all three agencies identified areas where cuts can be made, Turner said.
Police will cut their costs by $1.1 billion, firefighters by $802 million and municipal workers by $700 million. That equals a 33 percent reduction, Turner said.
In the plan, which the mayor hopes to present to the Texas Legislature next year, operating costs would be required to remain within a specified range. If costs rise above that range, it would require operators to immediately determine how to reduce spending to fall back within the range.
The plan also calls for 30-year evaluations of the plan, instead of negotiations happening every year, Turner said. He also said changes can’t be accomplished without a change in benefits.
"No longer will we kick the can down the road in this city," Turner said.
Turner said that while the governing bodies of both the police and municipal workers systems have consented to the plan, there are some sticking points with the firefighters' governing body. However, he’s confident that they will become more comfortable with the plan as the final language is worked out.
Turner warned, however, that his plan is non-negotiable.
"The current system is not sustainable," Turner said. "This is in the best interest of employees."
Turner said that once the final details of the plan are fixed, he will present it to the City Council for adoption.
The battle over the city's pension fund has raged since 2001.
Since then, experts have weighed in on options the city could take, including a report issued by Rice University's Kinder Institute for Urban Research.
"That's a good start," said Bill Fulton, director, Kinder Institute, in response to Turner's proposal.
"Whether or not he can really close the gap over a period of time depends, I think, on whether they hit the targets and depends on a lot of assumptions he put into it."
One assumption is a 7 percent return on investments, annually, over the next 30 years.
The other assumption proves to be a political hot potato in weeks to come: making sure all three pension boards: police, fire, municipal, agree with the proposal.
So far, Houston Professional Fire Fighters Association is not in agreement. The union takes issue with the $802 million in cuts, as well as a provision that would allow the city to renegotiate contributions and employee benefits, should costs increase in the future.
"I think the point is no one really understands what [the proposal] is," said Alvin White, president, Houston Professional Fire Fighters Association. "It's a very experimental thing that hasn't been used anywhere else. We don't know what harm could be done, if any."