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Mayor seeks pension fund cuts

Given the size of the budget shortfall for next year and the amount that the city pays into the various pension funds, Mayor Parker’s proposal to pay less should not be a surprise to anyone.

City Attorney David Feldman and Finance Director Kelly Dowe already have asked firefighter pension executives to accept $14 million less than the city’s obligation to the pension system for the fiscal year that begins July 1. They plan to ask police for cuts as well, they said.

“We asked them to work with us to determine whether we could reduce the amount paid in, and I pledged that concessions made would offset cuts made to the fire department,” Parker said Tuesday.

Early this month Parker asked the fire department to cut $22 million from its $449 million budget as part of a larger set of spending targets issued to city departments.

Firefighter pension leaders who met with Feldman and Dowe at City Hall late last week said they were told that the city would be laying off between 200 and 300 firefighters, as well as closing some stations. They talked of the administration’s desire to reduce the pension payment by $14 million during the same discussion.

“We feel like it’s an ultimatum. The result is, from their perspective, to make the pension plan look bad so they can pass their budget,” said Christopher Gonzales, executive director and chief investment officer of the Houston Firefighters’ Relief and Retirement Fund. “They’re balancing the budget on the backs of the firefighters, and that’s unfair.”

With all due respect, I think the other city employees that have been furloughed or laid off would disagree with that characterization. Everyone knows that the trajectory the city is on with its pension obligations is unsustainable. The resolution will ultimately involve some combination of the city paying less, the firefighters contributing more, and pensioners (current and future) taking less. It’s just a matter of how messy it is getting there.

UPDATE: I received this statement from HPFFA President Jeff Caynon, which disputes the Mayor’s claims about the budget. It reads in part:

“A few months ago, firefighters negotiated with HFD to restrict vacation use and adjust the department deployment model which saved the city about $5 million. The mayor then recently ordered HFD to cut its budget by five percent – or about $25 million. The Houston Firefighters Relief and Retirement Fund (HFRRF) recently lower the city’s contribution thereby saving the city of Houston $13 million per year for the next three years.

“None of the $13 million pension reduction was counted toward the $23 million budget cuts ordered by the mayor. In fact, during recent discussions the mayor’s financial director expressly notified firefighters that any savings related to pension reduction would not count toward the city’s imposed HFD budget cuts.

“The mayor’s comments today were misleading, but they also continue a pattern of behind-the-scenes pension and layoff threats that contradict the administration’s statements about their public safety commitment. The mayor also has attempted to pit police and firefighters against each other by increasing the city’s contribution to the police pension without argument while failing to acknowledge the efforts of firefighter’s pension.”

Click the link for the rest.

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  1. Marc says:

    And are you going to include the reply from the firefighters pension? This is what the firefighters pension gets for actually being fiscally conservative, 93% funded and generally solvent. What Parker is asking for are permanent changes for a temporary problem – i.e. the worst economic downturn since the Depression. The firefighters pension is and has been in excellent shape and these changes are not designed to improve the long-term viability of the pension or the city budget, in my opinion.

    Gonzales statement about balancing the budget on the backs of firefighters is perhaps a bit overblown, but what about the new contract the police just received – they are getting significant raises, albeit a couple of years from now. How is that fiscally responsible?

    Also, a few facts:
    – Firefighters in Houston contribute 9% of their salary to the pension – my wife, who is works for a non-profit and has a 403(b), doesn’t contribute that much of her salary to her 403(b).
    – COH matches with an actuarially determined contribution that is statutorily regulated and starts at 18% of salary. It has been higher lately due to economic conditions, but has been projected to DECREASE over the next two years (not increase, as the mayor has repeatedly stated)
    – The firefighters pension is now back above the levels of 2008 with regards to funding due to the recovery. This is what has caused the contribution levels to decrease.
    – The firefighters pension is not related to the union and the union can’t negotiate benefits related to the pension. Though they do work together at times on firefighter issues, the pension is a completely separate association and governed by statute. My understanding is the city plans to go to Austin to try to change the statute, but the Houston firefighters pension has many friends in Austin (Rick Perry spoke at a retiree lunch last year during the campaign – as much as I don’t like Governor Good Hair, he seems to be a friend to the Houston firefighters pension).

  2. Marc – Did you miss the statement from Jeff Caynon that I included at the end of the post? I didn’t include it initially because I didn’t have it. He sent it to me later in the day, and I added it as an update.