Apparently, you can cut costs by defaulting on your bills. Why didn’t I think of that?
Councilwoman Helena Brown has submitted a budget amendment aimed at solving the city’s decade-old pension problem: Stop paying.
Her amendment calls for defaulting on more than $200 million in contributions due to the city’s three public employee pension systems in the coming fiscal year.
The idea is that it would force the matter of escalating pension obligations into the Texas Supreme Court “to bring to question the state constitutionality of forcing a municipality into bankruptcy by obliging them to maintain an unsustainable pension plan,” according to the language of the amendment.
Sure. Because nothing says “fiscal responsibility” like declaring that you will not honor your fiscal responsibilities. Just like they do in the private sector.
Now I don’t know if CM Brown came up with this genius idea after reading the Chron story about some pensioners being able to earn more as retirees than as active employees or not, but it doesn’t matter. It’s dumb and a non-starter no matter what its pedigree. As far as that story goes, I will note three things.
1. The deal that the city of Houston has always had with its employees is that they have agreed to trade current compensation for future compensation. Putting it another way, city employees tend to get paid less than they would for doing the same kind of work outside city government, and in return they get a better retirement package. Maybe this deal isn’t so good for the city – or for the employees – any more. Maybe it’s not sustainable even if it is an otherwise good deal. Whatever the case, the point is that it’s a deal, which is to say a legally binding contract that was negotiated in good faith. I haven’t seen the text of Brown’s amendment so I don’t know if she has factored in the possibility that her hoped-for Supreme Court ruling would be in favor of the pensioners, with the city being required to pay zillions of dollars in damages and penalties for illegally denying them the money the city was obligated to pay, but if I had to guess, I’d say it’s not discussed in any detail. Bottom line, there’s a substantial amount of risk associated with summarily deciding that you are not obligated by your legal obligations.
2. All of the above is a longwinded way of saying that the way to alter the terms of a legally binding contract that was negotiated in good faith is to negotiate them. If the other party doesn’t want to reopen negotiations, you have to convince them it’s in their best interest to do so. That would be the right thing to do even if it weren’t the legally required way. It’s true that the city is limited in what it can do by state law, but the principle remains the same.
3. Again, as a reminder, over two-thirds of the General Fund budget is devoted to public safety. That’s way more than what we spend on pension contributions. If CM Brown is motivated by a sincere desire to help control the city’s expenditures, and not a crass and perverse motivation to screw public employees, there are other avenues to explore and bigger targets at which to aim. We can and will argue about the best way to achieve cost reductions, if such reductions are a good idea in the first place. Fixating on one means to achieve that end is almost certainly a suboptimal way to do it.