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A bit of perspective on pensions

Mayor Parker and current members of Council will receive pensions from the city some day. They also will some day vote on what steps the city should take to deal with the pension system. Is that a problem?

“Whenever you’re an elected official, there’s not an easy way around it,” agreed Josh McGee, vice president for public accountability initiatives at the Houston-based Arnold Foundation, who has studied pensions nationwide.

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Both McGee and University of Houston economics professor Steven Craig said they are less worried about council conflicts of interest than about pension boards’ makeup.

As a recent city bond prospectus describes it: “The majority of the trustees of each pension system have a personal interest in the pension plan administered by each board of trustees.” It also notes, “No legal challenges have arisen as a result of potential conflicts of interest.”

“There is no one representing future taxpayers” on the pension boards, Craig wrote in an email. “It is a terrible thing to ask taxpayers of the future to pay for wages of the past.”

Todd Clark, chairman of the board of trustees of the Houston Firefighters’ Relief and Retirement Fund, said in an emailed statement: “It is absolutely suitable for those whom the plan is for to be on the board, particularly as opposed to parties that may want to use the plan money for other things.”

Seems to me we ask taxpayers of the future to pay for lots of things from the past. I don’t know what’s so terrible about asking them to honor good faith agreements made before their time. Clark is absolutely right to note that having pension boards made up entirely of people for whom it is other people’s money is problematic in other ways. I don’t see what the fuss is about. Find me a publicly traded company whose board of directors has no stockholders in that company on it, then we can talk.

Council Member Bradford, who as a 24-year HPD employee is one of those people eligible for a substantive pension, tries to bring some perspective.

Bradford said he does not support a change in the pension boards, though he is open to discussing it. He noted, as pension officials do, that pension obligations currently account for only 9 percent of the city’s general fund budget. Yet, much of the recent discussion of the city’s long-range finances has revolved around pensions.

“If we change the board of the pension, you’ve still got 91 percent of the problem elsewhere,” Bradford said.

You mean 91 percent of the budget elsewhere, which as we all know goes primarily to the police and fire departments. Pensions are going to account for a bigger share of the budget soon, but it’s still the case that HPD and HFD are the biggest items in there. I’m just glad I’m not the only one saying that we do have other things to look at and talk about than just pensions.

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7 Comments

  1. Peter Wang says:

    It’s really frustrating that all over the country, muni pension plans have stepped into similar giant potholes. Like Social Security, there’s not much you can do once the problem exists other than cut benefits or increase muni plan contributions.

    I have no answers, other than to tell my kids not to ever go into government as a career, because apparently your employer will screw you, financially. They’ll pay you poorly during your working tenure, and egg you on with promises of fine pension and retiree health benefits someday, but that isn’t working out, is it?

  2. Public Employee says:

    I don’t know enough about the city pensions to know if anything like this can be done now (it would help going forward, but I don’t know if it can be helpful with what’s already on the books). I also can’t claim to know if what created city pension problems may have been raiding the fund for other uses, or simply some odd rules regarding what pensioners can “earn” in the way of their pension. The state has a very sound retirement system that’s in very good shape. It’s handled through ERS, has strict rules about eligibility, funding, and what you will earn. Annuities are based on your highest 36 months salary, not some matter of your highest weeks. And while bonuses are rare, small, and infrequent, I’d be surprised if they were included in the calculation. In other words, with a state pension, if you retired at eligibility (usually “rule of 80″, your age and years of service have to add up to 80 to be eligible), your gross is going to be 60ish percent of your working salary. There’s nothing unreasonable about that, the fund is stable and well managed, it isn’t raided for other uses, and employees pay into it their entire career. There are no instances of of anybody taking home more in annuity than they made during their working years. And there are no instances of a survivor getting the employee’s full annuity. You choose at the time you retire which option you desire. If you choose survivor benefits, you will be taking home less per month as your annuity than you would be if you did not choose survivor benefits. Perhaps the city should model their pensions on the ERS system. I am not knowledgeable about city pensions other than snippets from the newspaper, but it sounds like some of the provisions for retirees are unreasonably high.

  3. Joseph Houston says:

    The Arnold Foundation is very active in funding anti-pension schemes across the country, its founder, John Arnold, tied to the Enron scandals that left so many in the private sector financially impaired. The word is that his hired guns and co-conspirators are trying to use selective statistics to push public opinion to truncating such pensions across the country in order for Arnold’s hedge fund to gain access to the resulting monies. As such, I would take everything coming out of their foundation with a pound or two of salt, the breaking of public pensions and unions clearly agenda driven.

  4. Ross says:

    Public Employee, the government pensions are far too generous. My pension is set at 1.6% for each year of service, and a minimum age of 55. Taking the pension benefit at 55 rather than 60 results in a 25% reduction in the benefit, 50% if you don’t have 15 years service at retirement. So, someone who retires at 55 with 30 years service will get a 48% pension. The base calculation for the pension is base salary, excluding overtime. Survivor benefits reduce the amount as well.

  5. Stanley James says:

    I can’t begrudge firemen and police officers getting a good pension. The local boys do not get half what their counterparts up north or out west get. HPD now offers 45% and makes them stay until they are 55 years old, none of this including overtime, no free medical, or other perks we associate with government workers.

  6. M. Routosky says:

    We’re still paying on upgrades to the Astrodome made to keep Bud Adams & company happy and we’re still paying on all sorts of other more reasonable things. Until a select group of multi-millionaires and billionaires started financing these academics, no one ever heard of them but just as soon as the rich tossed a few dollars their way, they have an endless stream of worries to enrich our lives with. Is this the latest spin on the old saying about those that can, do and those that can’t, teach while presumably, those that can’t make it teaching sell their souls?

  7. Joseph Houston says:

    Routosky, there has never been a shortage of academics willing to latch onto an issue where it would pay them the most and/or gain them the most exposure. These self appointed finance gurus are happy to grab onto a topic and there have always been wealthy individuals (or those in power) willing to buy their services. When McGee went onto a local radio show recently, he even admitted to not having read any of the three city pensions, only bits from the task force commissioned to focus on pension reductions. The wave files are still available for anyone wanting to listen to his rants, I think it’d be fair for every single one of his ilk to admit up front who is paying them, supporting their careers, and setting them up as “experts” when they clearly lack the requisite intellectual honesty needed to establish credibility.

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