Off the Kuff Rotating Header Image

City loses in appeal against firefighters’ pension statute

Here’s a pension fund-related litigation update for you.

Houston can’t overhaul a state-governed firefighter pension system that the mayor claims is pushing the city towards insolvency, a Texas appeals court ruled.

Houston sued the Houston Firefighters’ Relief and Retirement Fund in January 2014, seeking a declaration that a state law setting how the fund is operated, and giving the city no control over the amount of its contributions, is unconstitutional.

The city paid $350 million in pensions to firefighters, police and city workers in 2015, but its unfunded pension debt is $6 billion and growing.

A state judge sided with the fund in May 2014 and granted it summary judgment.

The city appealed, pressing its argument that the subject state law, passed in 1997, gives too much power to the pension fund’s board that is comprised of a majority of firefighters who are beneficiaries of the fund, and thus are inherently self-interested in maximizing firefighter pension benefits to the detriment of the city’s financial health.

The 10-member board is made up of six active or retired firefighter fund members who are elected by other firefighters, the mayor or an appointed representative of the mayor, the city treasurer and two citizens who are elected by the other trustees.

Houston claimed on appeal the state law violates the separation-of-powers principle in the Texas Constitution by delegating authority to a nonlegislative entity, the fund board.

The city cited Texas Boll Weevil Eradication Fund v. Lewellen. In that case, the Texas Supreme Court ruled in 1997 that a foundation established by the Texas Legislature to exterminate boll weevils that were threatening to destroy the Texas cotton industry unconstitutionally gave too much authority to the foundation to tax private farmers to pay for weevil killing.

But the 14th Texas Court of Appeals decided Thursday that the boll weevil foundation is fundamentally different from the pension fund board because the board includes public employees.

“The purpose of that [boll weevil eradication] foundation may be construed as protecting a private industry from a blight, albeit with an indirect benefit to the public. In contrast, eight of the 10 trustees of the fund’s board are current or retired public employees…We would have difficulty classifying the board as a private entity when the mayor and city treasurer also serve as trustees in order to administer benefits to public employees,” Judge John Donovan wrote for a three-judge panel.

The panel also rebuffed Houston’s argument that the state law is unconstitutional because it only applies to incorporated municipalities with a population of at least 1.6 million and a fully paid fire department. Houston is the only Texas city that qualifies.

The city claims the special treatment violates the Texas Constitution’s ban on the Legislature meddling in local affairs.

But the appeals court agreed with the fund’s contentions that Houston is uniquely dangerous for firefighters compared to the other four big cities in Texas—Austin, San Antonio, Dallas and El Paso—so sweeter pension terms are necessary to attract and retain firefighters.

See here for the background, and here for the ruling. There have been multiple lawsuits related in one way or another to the firefighters’ pension fund; it’s hard to keep track of them all because they go multiple months without any news. The city could appeal this to the Supreme Court, but I don’t think they will, for two reasons. One is that I doubt they’ll get a different outcome, and two is that while this lawsuit was filed by the Parker administration, the Turner administration has a much less contentious relationship with the firefighters, and is working on a pension fund deal with them. It would be a show of good faith, if not a bargaining chip, for the city to quit pursuing this lawsuit, and seek to settle or drop any other ongoing litigation for which the HFRRF is an opponent. The Chron story says the city “continues to believe the state statute is unconstitutional because it allows the firefighters’ pension fund to determine contribution levels”, and that the city intends to “seek further review”. We’ll see what happens.

UPDATE: Woke up this morning, and the following announcement was in my inbox: “Mayor Turner will unveil preliminary points of understanding with the Houston Firefighters’ Relief and Retirement Fund, the Houston Police Officers’ Pension System and the Houston Employees Pension System. The proposed plan will form the basis for a package of pension reforms that will be submitted for approval to the governing boards of the pension systems, City Council and the state legislature.” That’s happening today at 2 PM. So maybe this won’t have any effect on the negotiations one way or the other.

Related Posts:

Comments are closed.