March 02, 2004
One point five billion

The projected shortfall in the city employees' pension fund is now $1.5 billion, and there's a mad scramble to come up with ideas to fix the damn thing. Nobody's committing to anything other than ruling out a property tax hike, which, let's face it, would be political suicide.

There are three things in this story I want to comment on. First:


An actuarial report prepared for the Houston Municipal Employees Pension System in 2001, when the biggest changes were made, said the city could afford the changes. But by late last year, the forecast had changed drastically.

And a constitutional amendment, ratified by state voters in September, keeps cities from rolling back pension benefits they've already given to workers.


This may be a semantic quibble, but the "forecast" didn't change in the sense that the conditions which affected the long-term numbers suddenly became very different. I'm quite certain that a true and accurate forecast in 2001 would have been about the same as the one that came out late last year. What really changed was the identity of the person or persons doing the forecast, from someone with a cranial-anal inversion to someone who knew how to work a calculator.

As for that Constitutional amendment that was ratified in September, the reason you don't remember anything about it is because that was the same election that featured the tort "reform" amendment Proposition 12. Though I strongly suspect that a seemingly innocuous amendment like the one that now shackles Mayor White would have gotten overlooked in just about any election, I do wonder if pushing it back to November might have given the competent forecasters enough time to figure out and warn about this mess we're facing. Oh, well.

One more thing:


Towers Perrin, the firm that prepared the 2001 actuarial report, has declined to comment on the major revision it made to its forecast last year.

I'm just curious here, but since I haven't seen any mention of it yet, I'll ask: Do these guys have any liability for their role in this debacle? What is the likelihood that the city will try to shake a few dollars loose from them as part of an overall solution, and what is the likelihood that they'd be successful? If nothing else, at the very least they ought to refund the fees we paid them for their lousy advice.

Posted by Charles Kuffner on March 02, 2004 to Local politics | TrackBack
Comments

Though I strongly suspect that a seemingly innocuous amendment like the one that now shackles Mayor White would have gotten overlooked in just about any election, I do wonder if pushing it back to November might have given the competent forecasters enough time to figure out and warn about this mess we're facing. Oh, well.

For the record, Kuff, you approvingly cited guidance for Proposition 15 last fall.

Posted by: Greg V. on March 2, 2004 9:15 AM

So I did. Didn't work out, obviously.

For what it's worth, here was the coverage of Prop 15.

"Proposition 15 would prohibit Houston and other cities from ever reducing or impairing the future retirement benefits of vested employees.

Supporters say police officers, firefighters and other local government employees deserve the security of knowing that their retirement, disability or death benefits could never be reduced.

But opponents argue that it would be wrong to tie the hands of local officials, who may have to make changes in pension plans to meet changing economic conditions. And they note that private sector employees, whose pension plans are often less generous than public workers', don't have a constitutional guarantee that their benefits will remain unchanged."

Searching the Chron's archives, they editorialized a "No" vote on this proposition:

"Retirement plans for municipal employees, firefighters and police officers in Houston and other major cities are generally much better than those provided in the private sector. A Houston municipal employee, starting work at the city at the age of 20 or so, can retire 25 years later at 90 percent of his or her salary. Firefighters and police officers have similar or better deals.

Meanwhile, taxpayers' cost to maintain these pension plans has skyrocketed. Mayors and members of City Council through several administrations have been irresponsible in controlling rising pension costs.

Taxpayer contributions to the municipal employee pension plan increased by 40 percent this year. Annual taxpayer contributions to the police pension fund will increase from $34 million this year to $126 million in 2007. Who can say how much more taxpayers will have to cough up in the future?"

It's an unfortunately accurate prediction, but it's also the only place you'll find any dollar amounts mentioned. My point was that no one paid any attention to this amendment. I'm as guilty as anyone, but I do have company.

The Sec of State Election Results webpage is too busy to give me returns on the Prop 15 vote right now, but looking at this story on the returns makes me suspect it was not a close vote. Midland County voted for it by a 2-1 margin, which should give some idea.

Not much we can do about that now, though.

Posted by: Charles Kuffner on March 2, 2004 11:03 AM

FWIW, my observations have been that Texans pass all constitutional amendments presented to them on the ballot. Not a single amendment failed in November's elections. This is true even when there is well-funded opposition to an amendment that crosses party lines such as Prop 12. Most amendments face zero organized opposition such as Prop 15.

And to echo a statement you made, there's not much we can do about that.

Posted by: Greg V. on March 2, 2004 11:10 AM

There's a comment here which says "Since 1876 (and before this legislative session), the Legislature had proposed 587 amendments to the Texas Constitution; 410 of which have been approved." Doing the math, and factoring in the 22 new amendments (432 out of 609), 71% or all amendments proposed have been approved.

Posted by: Charles Kuffner on March 2, 2004 11:29 AM