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Houston municipal employees may see health insurance costs get hiked again

It’s one of many possible proposals for closing the upcoming budget shortfall.

Mayor Annise Parker

Mayor Annise Parker

A key option, [Mayor annise] Parker has said, is to increase the share of health care costs employees pay. The city now pays three-fourths, and employees pay one-fourth.

“We have a very generous health benefits plan, even with the changes,” Parker said, referring to premium increases and cuts to benefits made last year. “We could shift more of those costs to our employees.”

Forcing employees to pick up 30 percent of health costs, rather than a quarter, could save the city up to $20 million in the first year, officials estimate. Requiring employees to cover half of health costs could save $80 million.

Melvin Hughes, president of the Houston Organization of Public Employees, said such discussions mean the mayor and council are not considering the people who make the city run. Such an increase would lead many workers to stop seeking care for themselves and their families, Hughes said.

“There’s no way we could accept that. We can’t afford an increase on health care. We do not make that kind of money,” Hughes said. “I understand it’s tight and I understand there’s a budget shortfall coming this way. They’re going to have to manage the money a little bit better.”

This is not the first time city employees have faced this. I’d be pretty unhappy if I worked for the city right now. They may have generous health insurance benefits, but this is a pay cut no matter how you look at it. There are other ideas being explored to deal with the shortfall, but you can only sell real estate once, and the projections are four several years. The city would like nothing more than to reduce its pension payments, but as we well know much of that is not in their hands. One way or another, the next Mayor is going to have to deal with a lot of this.

Two views of pensions

The Chron’s Sunday op-ed pages were filled with pension-related discussion. Here are the citizen members of the Long-Range Financial Management Task Force, fresh off of their report release, taking to the pages to lay out what the city wants from the Lege on pension issues.

  • The Texas Legislature must change the current law that gives control of the pension plans to the city employees and retirees who benefit from the funds. The Legislature needs to let the city, not the beneficiaries, manage the funds, since the city has the responsibility for paying the benefits. This change will not affect the integrity of the funds’ assets.
  • The city must be given full access to the three pension funds’ detailed financial information including investments, benefit structures, individual payments and participant information, so that the city can independently calculate benefits costs. Currently, state law and the funds’ internal policies deny the city access to this information. Even the trustee appointed by the mayor is prohibited from giving financial information to the city Finance Department for analysis. The city must have such information in order to fully understand the benefits being promised and paid and in order to be able to make the appropriate changes to the benefit structures to achieve benefit levels that are sustainable. Our biggest disappointment in this process was our inability to obtain full access to the pension information. Without it, we were unable to determine, for example, whether pension reductions necessary to build a sustainable retirement system could be limited to reductions for future employees or whether roll backs to current employees will be required.
  •  Benefit schedules must be adjusted to eliminate “spiking”- the manipulation of benefits through the use of overtime and late career or temporary salary increases in the calculation of final average pay upon which the benefits are based. Eligibility to receive retirement benefits must be at reasonable ages with retirement benefits capped at a reasonable level. Incredibly, under current plans, some former classified employees retire after only 20 years of service without regard to age and others receive annual retirement benefits in excess of 100 percent of their preretirement base pay.
  •  Pension security requires that the city fully fund the Actuarial Required Contribution every year based on a reasonable assumed discount rate without exception.
  •  We must eliminate the option of granting additional retirement payments for employees who reach retirement age but continue to work.
  • In a fair and sensitive way, we must change postretirement health care benefits, which impose unreasonable costs.

None of this sounds unreasonable in the abstract. There are no numbers attached to anything in this writeup, so there’s no way to judge how it would affect any individual or group of individuals, and of course we would need to hear from those people to know what their concerns are before anything moves forward. But as a starting point, none of this raises any red flags to me. I’d also like to thank our only Governor for bringing the penultimate item to everyone’s attention.

By the way, I have not seen this reported anywhere else, but there was a minority report written as well. This report was written by the employee representatives (including HOPE) on the Task Force, who represent some 40,000 city employees. From a statement they sent out:

The report states that it agrees with the goals of the Task Force but that the overall report focuses too much on short-term goals and not enough on solutions that address core financial issues. Instead, the Minority Report suggests the following:

• Restructuring the City Debt and take advantage of the historically low interest rate levels.
• Address City Structural Challenges by thoroughly analyzing its enterprise Funds, TIRZs and Management Districts and whether they provide a real financial benefit to City taxpayers.
• Analyze the Draining Fee Structure to determine what present City related services can be funded with it and make sure that any savings are transparent and communicated to the public.
• Long-term Economic Growth strategies need to be implemented that incorporate efficient services to the citizens of Houston.
• Carefully consider proposed Public-private combination strategies, like privatizing the City’s EMS services, to determine whether true cost-efficiencies can be realized without a deterioration of city services upon which the public now relies.

The other issue taken up by the Task Force was City Pensions. Presently, there are three City of Houston Pension programs, one for the Municipal employees, one for the Police (each governed by an appointed and elected pension board), and the Statewide Fire Fighters Pension governed at the state level. The Minority Report states that there are misconceptions about the pension reform matters that have been in the news and that the City’s long-term debt has historically been rolled forward with little long-term thought given to how the debt will be funded. The three pensions are governed by independent boards and the City can engage these boards to make changes through a ‘meet and confer’ process (as was done recently for Municipal and Police). The Minority Report recommended the following for the pensions.

• Funding of Pensions: They need to be funded at actuarially required contribution levels.
• The Risk Equation: The funding risk for the pensions is spread over investment returns, employee contributions and the system’s plan design. They note that the pension funds exist for the benefit of multiple generations of workers and must focus on the long term and that the City’s pensions have matched or exceeded their target returns of 8.5% (a rate that is considered reasonable but subject to projection changes at any time).
• Defined Benefit Plans (DB’s): Suggestions have been made to convert DB’s to defined contribution (DC) plans but the report notes that if done, they are only cheaper if benefits are cut. Presently, Municipal employees average less than $22,000 a year in retirement after a lifetime of work at low wages and no extras like bonuses. It has also been found that when DB plans are closed and converted to DC plans it results in substantial increases in costs and could jeopardize attracting future City employees.
• Transparency: It has been alleged that data from the pension plans is secretive, especially the DROP accounts, but the report points out that this is not so and that information is available to actuarially determine any future costs.

Obviously, that last point contradicts what the authors of the above op-ed claim. I’d like to get some clarity on that. The full minority report can be seen here.

Over on the letters to the editor page, HFT President Gayle Fallon disputes some of the assertions made by Bill King in his latest screed about public pension systems.

The Teacher Retirement System (TRS) is well managed and well funded. According to its last audit, it is solvent through 2075 and is funded at 82.7 percent – a better funding ratio than most private plans. A funding ratio of 80 percent or above is considered a sign of a healthy pension system.

There are several key points to consider as the attack on public pension funds ramps up:

  • More than half of the money in the TRS funds has been contributed by the educational employees.
  • In 1995, the state reduced its contribution from 7.31 percent to 6.0 percent, the minimum that is constitutionally guaranteed to educators, and left it there for 12 years. Employees contribute 6.4 percent.
  • Contrary to King’s statement that retirees have had no cost of living adjustment in over 10 years, retirees received a cost of living increase this year from TRS.
  • The TRS rate of return has exceeded the 8 percent rate targeted by TRS actuaries for decades. As a result, the taxpayer share of benefits paid is only 20 percent.
  • Moving workers to 401(k) plans places all of the risk on the employees. If the market drops during their retirement, they have nothing to protect them from spending their old age in abject poverty. Most workers who have a 401(k) also have Social Security. Texas teachers do not. All they have is TRS.

I will say again, as I contribute to the problem today, I think we are devoting too much time and attention to the pension issue as it relates to city finances and not enough to other issues. King is talking about more than just the city of Houston’s pension systems, and despite his assurances about his intentions I don’t have a particularly high level of trust in what he’s saying. Part of this is simply a distaste for advocacy of austerity, sacrifice, and change that don’t affect the person doing the advocating. We’ve already had plenty of that, thanks. There likely will need to be some changes made to public pension systems, in Houston and in Texas, to ensure their long term viability and to be fair to the taxpayers. All I’m saying is that it’s only one piece of the puzzle, and we need to spend more time on all the other pieces.

The Long-Range Financial Management Task Force report is out

A little light reading for your Sunday. The report generated criticism before the figurative ink was dry on it.

Union leaders criticized the report before it was even delivered to the mayor, with Houston Organization of Public Employees President Melvin Hughes declaring the report an attack on employees.

“It’s not about balancing the budget,” Hughes said. “It’s about stripping workers of their voice – not only their voice, but their wages.”

The six union and pension representatives on the 16-member task force released a dissenting report proposing the city refinance debt, end redevelopment zones and pay some city employees with drainage fee money to ease pressure on the general fund.

Though I’ve heard about some of the ideas that HOPE has proposed, I have not seen an actual report from them. I still think there’s been a disproportionate amount of talk about pensions and not nearly enough about growth strategies, optimizing tax revenue, and health care costs. Since economic forecasts are usually wrong, the broader our plans are for dealing with these issues, the better off we’ll be. In any event, now the report is out, so we can stop speculating about it and instead engage more fully in arguing about it. Houston Politics has more.

City layoffs begin

With more to follow later.

Expressing faith that the “brighter tomorrow we wait for is just around the corner,” the Parker administration on Thursday began pink-slipping municipal workers in hope of easing an expected $80 million budget shortfall in the coming fiscal year.

A memorandum from Mayor Annise Parker’s office to City Council and department heads said the first layoffs targeted workers in “non-public safety” departments.

Thursday’s layoffs are the first of many expected by May 17 — the legal deadline for handing out termination notices. Laid-off workers will remain on the city payroll until July 1, the beginning of the new fiscal year.

Mary Benton has a copy of the Mayor’s memo, which notes that “Economic improvements seen in the last month or so have allowed us to reduce the number of planned layoffs by more than half. If there is further improvement, it is possible that some of the remaining planned layoffs could be reversed.” From your lips to Susan Combs’ ears, I say. It is true that state sales tax collections have been up considerably over the past few months, though they’re still well below pre-crash numbers. But as long as the actual revenue is beating projected revenue, the budget picture will improve. Keep your fingers crossed.

Voluntary furloughs

I suppose this was inevitable.

Mayor Annise Parker announced a voluntary furlough program for civilian employees in December, the first in what may be a series of difficult steps the city must take to close a $30 million budget deficit in the next six months.

Parker said she would take a furlough — a day off without pay — and five City Council members standing with her also agreed to do likewise, including Sue Lovell, Al Hoang, Jolanda Jones, Wanda Adams and Brenda Stardig. At best, the city could reap $1 million in savings from the program, although Parker said it was too soon to know how many employees would participate.

“The budget is tightening up,” Parker said. “Some of the savings we are working on … probably will not materialize this fiscal year.”

The Mayor’s announcement is here, and a statement from HOPE, which is definitely taking one for the team, is beneath the fold.

In addition to the $30 million gap the city must close in the next six months, there remains a $118 million gap in 2012 and about a $420 million projected deficit in the next three years. To deal with those gaps, the administration has begun to contemplate raising taxes, instituting additional furloughs and renegotiating pension payments.

City Controller Ronald Green, who said he planned to take a furlough, predicted that involuntary furloughs would be inevitable.

As I’ve been saying, it’s a function of what amount of government services we’re willing to tolerate, and what amount we actually want. And anyone who talks about “sacrifice” without including a higher property tax rate as an option is someone who’s hoping that sacrifice will be borne by others. Stace has more.

(more…)

HOPE/SEIU poll of the Mayor’s race

Here’s another poll result, this time from Houston Justice for Janitors.

Annise Parker leads her closest opponent by a 2-to-1 advantage in an initial vote preference for mayor. Parker holds a solid lead in the election for Houston mayor (28% Parker – 14% Locke – 13% Brown – 5% Morales — <1% Huntley – 40% undecided), though the plurality of voters are still undecided. After hearing completely positive introductions of each candidate, Annise Parker maintains her significant double–digit lead over the rest of the field. In an informed vote preference where positive bios of each candidate were read, Parker is still in control of the race (33% Parker – 19% Locke – 18% Brown – 5% Morales – 12% Huntley – 13% undecided).

You may be wondering, as I was, why they bothered to include TJ Huntley in this poll, given that he dropped out of the race (and endorsed Morales) back in August. The answer comes from the poll summary:

The poll, conducted by national research firm Hamilton Campaigns, is based on a survey of 400 registered voters who are likely to vote in the November 2009 mayoral election in Houston. Voters were interviewed by telephone in the period July 17-20, 2009. The margin of error for a sample of this size is ±4.9 percentage points, at the 95% confidence level. The racial composition of the sample was 49% White, 33% Black, 15% Hispanic, 3% Other.

Which leads to the next question: Why is a poll from July just being released now? I can’t answer this question, but I do have to wonder how accurate the result is two months later, given the TV exposure Brown has had, among other things. This poll has far fewer undecideds than the more recent KHOU poll, which seems counterintuitive, though it could be a function of the likely voter screen each pollster used.

Beyond that, the main point I want to bring up is with the “informed voter” sample, in which Morales and Huntley were described as follows:

Roy Morales is a 51 year-old Hispanic and serves as Harris County School Trustee. Morales is passionate about our children receiving a proper education, staying in school, and staying off the streets. Morales understands that when our children grow up they are not only going to be competing for jobs with people here, but also with people in other countries like China and India. Morales is running for mayor to help move our children up the ladder of success — not with welfare or handouts — but with education and hard work.

T.J. Huntley is a 37 year-old Anglo successful businessman who is pro-life, believes marriage should be between a man and woman, and supports the right to bear arms under the 2nd Amendment.

Now which one of those descriptions screams “Republican!” to you, and which one doesn’t? It’s no wonder that Morales’ total remained the same in each, while Huntley went from a complete non-entity to 12% of the vote. That basically tracks the boost Morales got from the “informed voter” sample in the KHOU poll, which unlike this one specified party identification. About ten percent of the vote is undecided Republicans. If they figure out who Roy is, he’ll easily crack double figures, and could affect who makes it to the runoff. If not, who knows what those folks will do – stay home, undervote, spread their support around, some combination. Roy has no money, but the Harris County GOP could try to whip up some support for him. We’ll see if they bother, or if they can afford it.

Anyway. This is an interesting result, but I’m not sure I know all that much more about the race than I did before I saw it. Houston Politics has more.

Endorsement watch: SEIU and HOPE

The Houston Organization of Public Employees (HOPE) and Service Employees International Union (SEIU) Local 1 members have made their endorsements for the November elections. From the press release:

Mayor – Annise Parker
At Large 1 – Karen Derr
At Large 2 – Sue Lovell
At Large 3 – Melissa Noriega
At Large 5 – Jolanda Jones
District A – Lane Lewis
District B – Jarvis Johnson
District D – Wanda Adams
District F – Mike Laster
District H – Ed Gonzalez
District I – James Rodriguez
City Controller – Ron Green

You can read the full release here. I note that they did not mention the At Large #4 race, for which the endorsement status has been the subject of controversy. I sent an inquiry in about this and received a reply that indeed, no endorsement was made. Seems a bit anti-climactic, but there you have it.

Freeman and Bradford spar over SEIU endorsement

Last night, Noel Freeman sent out this press release:

Service Employees International Union (SEIU) Local 1 confirmed Tuesday during a screening interview with City Council At-Large Position 4 candidate Noel Freeman that his opponent, C.O. Bradford, has falsely claimed to have received its endorsement.

Bradford issued a press release on August 17, 2009 announcing he had received SEIU’s endorsement. According to SEIU officials, Bradford had been asked to remove the endorsement from his campaign website more than a week ago, but as of 11:00 pm on September 1st, the endorsement still appeared on the website.

“I find it disappointing my opponent would attempt to mislead voters by claiming an endorsement he does not have.” Freeman said. “My opponent’s claim that he received SEIU’s endorsement more than two weeks before they even finished screening candidates in this race does a tremendous disservice to the proud men and women of SEIU who take the political process seriously.”

This morning, C.O. Bradford responded with a press release of his own:

“C.O. “Brad” Bradford does have Labor’s endorsement. Noel Freeman’s claim that C. O. Bradford is falsely claiming that he had received the endorsement of the SEIU, Local 1 is not truthful. I am the person that told C. O. Bradford that he had the endorsement of the Harris County AFL-CIO Council and of all of the Unions affiliated with it – including SEIU, Local 1. It is possible that SEIU, Local 1, is reserving their endorsement and they have every right to do so. I gave C. O. Bradford the wrong information. Noel is off base on this one and is stirring up trouble to get attention. The Unions of the Harris County AFL-CIO Council did endorse C. O. Bradford. If one or two of the 77 Unions choose to do otherwise, this is still an endorsement of the whole (thousands and thousands of members who will be informed of the endorsement) of the Labor movement for a very good candidate who will represent Houstonians very well on City Council. Noel Freeman does not have our endorsement,” stated Mr. Richard Shaw, Harris County AFL-CIO Council.

“I am honored to have received the endorsement of the Labor Unions in Harris County. I am committed to helping the thousands of workers who are striving for better conditions, benefits, safety equipment, and training for the greater good of all in our community,” stated Bradford.

Both Freeman and Bradford suggested that I speak to Tiffany Hogue with the SEIU, Local 1 organization. So I did, and this is what she told me:

– Generally speaking, all of the local unions participate in the AFL-CIO screening process, with the AFL-CIO acting as an umbrella organization for this purpose. Each union has the right to conduct its own screenings and make its own recommendations, but most of them follow the AFL-CIO’s lead. This is basically what Shaw said.

– SEIU, Local 1, and HOPE, which is affiliated with AFSCME, is in the process of conducting its own screenings and making its own endorsements for all city races. They have already issued an endorsement of Annise Parker for Mayor, but have not yet completed the screening process for other races. They anticipate doing so and announcing their endorsements in the coming weeks. I specifically asked if this meant that they could endorse Freeman, and she said yes, that could happen.

What that says to me is that Freeman’s claim that Bradford did not have the SEIU endorsement is truthful. On the other hand, Bradford certainly had reason to believe he had the SEIU endorsement once he had won the AFL-CIO Council nod, based on the usual way these things go and on what Shaw told him. I don’t think either of these points is seriously in dispute.

Where it gets dicey is the claim that Bradford had been told to remove SEIU’s name from his endorsement list. Bradford denied being asked by anyone to do this. Freeman says he had several conversations with Hogue about this, that she told him she had asked Bradford to take SEIU’s name off his list, and that when he asked her at his screening interview to confirm that someone had asked him to take it down, she said Yes. Hogue agrees she told Freeman that she had heard that someone had asked Bradford to do this, but she told me she didn’t know who that was, and she couldn’t say for certain that it had happened at all. Freeman, in a followup email, gave specific dates and times for the conversations in which he said he asked about this.

So that’s where it stands. I’m somewhat at a loss for what to make of it. It’s clear there was miscommunication, but it’s not clear where it all comes from. This is hard for me, because obviously I wasn’t party to any of the original conversations, and because I like everyone involved. I don’t know what actually happened, but this is what I’ve been told about it. I don’t know how much this clears things up, but it’s what I know. If I hear more, I’ll update this post.

HOPE press conference on employee efficiency suggestions

Ever think that the city’s employees probably have some good ideas for how they could conduct their business in a more efficient manner? Well, the Houston Organization for Public Employees (HOPE) thought so, and they conducted a three-week survey of their members to get their suggestions. Today they’re having a press conference to announce the results:

Press Conference Advisory

Houston Organization of Public Employees (HOPE)

Annise Parker, Gene Locke, Peter Brown, and Others to Award City Employees for Their Budget Efficiencies Ideas

WHAT: Press Conference hosted by HOPE, with guest speakers, including Houston’s 2009 Mayoral candidates

WHEN: 12:30 pm, Wednesday, June 17, 2009

WHERE: City Hall Rotunda (1st Fl.), 901 Bagby

BACKGROUND:

At a time when the city is facing a great challenge in providing quality public services with limited resources, many are turning to their greatest resources, their employees, to generate new ideas to streamline processes and improve efficiency. Despite pressure from the city employees union and members of city council, the city never implemented a process to hear frontline employees’ ideas.

The municipal employees union, HOPE, however, generated hundreds of efficiencies ideas in just three short weeks by surveying frontline municipal employees. If implemented, some ideas would result in millions saved, millions generated in new revenue, or, as HOPE’s President Melvin Hughes put it, “Better ways of doing what city employees already do.”

HOPE, along with its very special guests from the political and business communities, will be awarding six city employees for their contribution to this process. (Awards to be presented by Peter Brown, Annise Parker, Gene Locke, and others).

Good to hear that the Mayoral candidates will be there, since it’ll be up to one of them to implement these ideas. Stace has more.

UPDATE: And here’s the post-conference release:

The Houston Organization of Public Employees (HOPE) today held a press conference, with special guests Peter Brown, Gene Locke, Annise Parker, Councilmember-Elect Ed Gonzalez, and others, to award city employees for their outstanding contribution to the HOPE Bright Ideas contest. The contest, which surveyed city employees, was spearheaded by the municipal employees’ union when the city looked to outside contractors for efficiencies, instead of frontline employees—a free source of efficiencies ideas.

Employees generated concrete ideas that can be implemented today, and can result in huge savings and millions in new revenue. For example, stronger enforcement of dumpster permitting can result in $6 to $10 million in new revenues. Also, cross-training of inspectors across city departments and increased communication can make our residents and neighborhoods safer, and ensure that property owners are adhering to city codes and are being penalized or shut down when residents are at risk.

The survey process was completed in just three short weeks, during which over a hundred surveys were collected. HOPE presented the most profound findings at city council on June 9th, and received overwhelming support from council, including Council members Clutterbuck, Adams, Jones, Brown, Rodriguez, and Khan, who all chimed in to voice their backing for the city employees’ ideas. Council members Brown, Clutterbuck, and Rodriguez even submitted amendments to the city budget in the wake of HOPE’s presentation, including, respectively, creating a commission to promote efficiencies in the city, reviewing the city employees’ ideas and implementing viable suggestions, and cross training inspectors.

With substantial support from the public, politicians, and the media, the voice of city employees has become a force to be respected in the city budget process. Regardless of the top-down style of city management, frontline city employees have shown that they know best where efficiencies are. That’s why prominent community, business, and political leaders will be presenting awards to eight city employees for their contributions to this process. The recipients are:

Grand Prize: Jesse Springer, for his idea of coming up with an efficiencies committee
Runner-Up: Daniel Box, for his ideas on cross-training and data sharing
Runner-Up: Latonja Bolden, for her idea on improving oversight for contracting and procurement
Runner-Up: Sharon Rivers, for her idea of reassessing outdated fee schedules
Runner-Up: John Cantu, for his idea on inventorying surplus items
On behalf of the Aviation Department, HOPE Aviation District Representative Bobbie Jo Taylor, for the idea of increasing airport passenger fees to $4.50
On behalf of the Solid Waste Department, HOPE Solid Waste District Representative Zuri Kadirifu, for the idea of enforcing the dumpster permit ordinance, generating potential revenues of 6-10 million dollars
Honorable Mention: Calvin Miller, for producing the most surveys from frontline employees during the HOPE Bright Ideas Contest

The Houston Organization of Public Employees, or HOPE, is the municipal employees’ union in the city of Houston. HOPE strives to concurrently raise the standard of living for Houston’s city employees and ensure the highest quality public services for Houston’s residents, now and in the future.

Thanks to all who participated!