It’s a good thing Houston got this done when it did. We couldn’t get it done earlier, and I don’t think we could get it done now.
Mayor Sylvester Turner
Now, nearly six years after Mayor Sylvester Turner shepherded a package of reforms through the Texas Legislature and the ballot box, the city’s pension systems face a far brighter future, according to business leaders, financial analysts and City Hall officials.
The city’s pension liability has shrunk to $2.2 billion, a quarter of what it was in 2017, according to City Hall figures. The city’s net financial position increased last fiscal year from $3.7 to $5.9 billion, an achievement Controller Chris Brown, the city’s independently elected financial watchdog, attributed to the reforms. And the city’s three pension systems have healthier funding levels, all while the city is on track to eliminate its debt in 30 years.
“My administration promised fiscal responsibility, and that is what we have delivered,” Turner said.
The results are not necessarily set in stone. Houston’s pension costs remain relatively high, and a market crash could test the reforms. The city faces other financial challenges, as well, from a structurally unbalanced budget to a pay dispute with firefighters. Still, the city’s pension picture unquestionably has improved from the crisis Turner inherited when he took office.
Turner’s reform package had three primary features: cutting benefits, infusing two of the pension systems with $1 billion in cash from voter-approved bonds, and recalculating the city’s payments.
The cuts, valued at $2.8 billion at the time, centered mostly on cost-of-living adjustments and survivability to descendants and family, instead of earned benefits for retirees. The cash infusion gave an immediate boost to the police and municipal systems. The recalculated city payments used more realistic projections of investment returns, shared risk if the market takes a downturn, and — most importantly — put the city on track to eliminate its debt.
Turner deemed the packages a “shared sacrifice.” The systems and their members took hits to their benefits and contributed more on their end, and the city had to issue more debt and start paying more in contributions.
“Whenever I go around the country, and I talk about this, it seems like Houston is the gold standard in pension reform for U.S. cities,” said Brown, a frequent critic of the Turner administration’s financial policies on other topics. “This should be a Harvard Business School case study in how to compromise in government.”
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The state has codified Houston’s pensions systems into state law, meaning any reforms had to wind their way through the Legislature. That was no easy feat, according to Greater Houston Partnership President Bob Harvey. The partnership first tried to tackle the pension debt in the Legislature in 2013, and found it would be a far more precarious enterprise than it first imagined. The idea of a shared sacrifice made it more feasible in 2017.
It is possible, Harvey said, that Turner was uniquely capable of getting these reform done, given his history and standing in the Texas House.
“I think that’s a fair statement,” Harvey said. “I think him doing it in his first year of office, when he has a 26-year history in the Texas House, that is what gave him the political equity to move something like this. It still wasn’t easy. There were times when it looked like this wasn’t going to be possible.”
I tend to think that Mayor Turner was the right Mayor at the right time to get this done, perhaps in part because it was so central an issue in the 2015 campaign. I don’t remember what happened in the 2013 session, but things can fail in the Legislature for any number of reasons. If this needed to happen this year, or in 2025 with a new Mayor, I’d be pretty doubtful about it. There’s too much general animus towards cities in general and Houston in particular, and not enough chamber-of-commerce-type Republicans to make up for it. The point is we got it done, it did what we hoped it would do, and we can turn our attention to other issues now.