This was unexpected.
Mayor Annise Parker
The trustees of Houston’s firefighter pension, who for years have fought the mere mention of changes to benefits as Houston’s enormous pension burden has continued to grow, now are shopping a compromise proposal.
Fire pension leaders say they simply are trying to save the city money as it approaches several years of deep budget deficits.
Reaction to the plan is mixed, however, with skeptics viewing it as a shrewd political maneuver aimed at avoiding broader reforms with an offer of modest savings, and others inclined to applaud any dialogue as progress.
The trustees’ alternative would not touch current or future firefighters’ benefits, but would have them contribute 12 percent of their paychecks into the pension fund, up from 9 percent now. The proposal also would change the way assets in the fund are valued, dropping the amount the city would need to contribute if investment returns are strong – as they have been in recent years – and increasing the city’s costs if returns are sluggish.
The fire pension board projects its plan – which assumes annual investment returns of 8.5 percent and yearly 3 percent raises for firefighters – would save the city $82 million over three years, and nearly $500 million in the next two decades.
Board Chairman Todd Clark would not discuss the details, citing ongoing talks, but said his team is “meeting with the mayor to come up with a proposal that will protect new hires and help the city with their budget issues.”
Mayor Annise Parker called the trustees’ idea “a pleasant surprise” on their willingness to talk.
“The offer from the pension is for individual firefighters to contribute more of their take-home pay toward their pension. That’s a very generous offer and we are appreciative, but it reflects no true pension reform,” the mayor said. “So, we countered back with the things we’ve been talking about since the beginning of my administration, things like caps on cost of living adjustments, the ability to have meet and confer.”
Interesting. The surprise is that they made any offer at all to the city, which has not been their strategy lately. As we know, the city has no leverage over the firefighters’ pension fund, and the the board’s position has been that the city needs to meet their obligations to them. I don’t know if this was motivated by the recent proposal by Mayor Parker to implement a different pension plan for new hires to HFD or by something else, but it’s worth seeing if this goes anywhere. What do you think?
Whatever happens with the specific proposal, it cuts Parker’s legs out from under her when the city’s lobbyist team heads to Austin next year. Their game plan was likely going to be a rehash of previous years failures that “they won’t work with us”. The HFRRF has had superior returns on investments for years now and any underfunding can be laid at the feet of the city, the fact that employee’s are not going to get 3% raises each year a big savings as well. If the pension board directed the extra money straight into the fund itself rather than allow it to accumulate in DROP accounts, it would have a larger impact as well but this amounts to a 3% cut in pay for a fire department already among the lowest paying in the country.
If the other two funds took a similar approach, municipal workers coughing up even 9% for their pensions and PD putting another 3% toward funding their benefits, it would go a long way to fixing the far worse problem the city has with pension obligations. Unfortunately, the biggest part of the underfunding is due to the city’s unwillingness to pay enough in to those funds too, preferring to give council slush funds, pay for parks outside the city limits, and corporate welfare rather than live up to contractual promises made.