Mayor Annise Parker
Long concerned about the cost of Houston’s pensions and stymied in her attempts at reform, Mayor Annise Parker is considering a dramatic step to place new firefighters into a separate, less generous pension plan, sources with knowledge of the discussions said.
Officials acknowledge the existing Houston Firefighters Relief and Retirement Fund likely would sue the city over the idea, which has not yet been formally proposed.
[…]
Houston Firefighters Relief and Retirement Fund chairman Todd Clark said he had not heard of the idea. He was not receptive.
“We would have to look at it and see exactly what it is they’re talking about,” Clark said. “If that’s the case, the pension fund will defend the firefighters and the pension system. That will be a fight that we will definitely get into. We won’t support changing our system for the new hires.”
[…]
Councilman Stephen Costello said the idea of a separate pension fund for new hires arose after the city sued the firefighters pension system in January, claiming it was unconstitutional for Houston to be on the hook for payments over which it had no control.
Lawyers for the pension fund, sources said, argued the Legislature’s control was not absolute, and that the city could create a new pension system if it wished.
The city lost a ruling at the state district court level in that case and is appealing. Costello said the current idea appears designed to invite another lawsuit as a legal test.
“You never know until you ask, so I think that’s what the city is going to try to accomplish,” said Costello, who chairs the council’s budget committee and long has advocated pension reforms. “I think the city is testing the water in terms of the constitutionality of the state regulating our pension system.”
The benefit structure of the new pension plan under discussion, Costello and other sources said, would mirror the pension new police officers get, but without automatic cost-of-living adjustments. That benefit is the single most expensive portion of the city’s pension plans.
See here for the background on the city’s lawsuit. I got a press release from the HFRRF about the ruling in May but never saw a news story about it. There never was one as far as a Google search can find, but you can find the press release here. Not much to say about this since it’s basically vaporware, but I do agree with CM Ed Gonzalez in the story that if you’re going to reduce pension payouts to future firefighters, you’re going to have to pay them more up front, Beyond that, we’ll see what if anything happens.
Kuff
I disagree with your statement about reducing pensions will result in higher salaries/enticements up front. I still think the economy (unless highly educated or in the energy sector) is not that strong and you will still get a lot of qualified applicants even with the reduced pensions. Why not just reduce pensions for new hires and leave all else the same so we can see how much that hurts hiring? Try it for 6 months or a year as a test case vs automatically saying it will cost more up front.
John,
reducing pension benefits for police and municipal employees resulted in a great many of the MOST qualified employees leaving. It also resulted in difficulties in hiring and retaining the kind of employees most citizens want. One example of this is how many police cadets are in the latest academy class; it started with 30 instead of the usual 75, and around 5 more have already dropped out-a record loss based on taking less qualified candidates. Another example would be with the city attorney, the man currently the second or third highest paid city attorney in the USA. He has had multiple raises of over 40% each to retain his services, all excuses about paying less because the local cost of living index is so low thrown out the window when it suits city leaders. Contrary to the mayor’s opinion, he is not particularly talented though he follows orders better than most qualified attorney’s who would better guide city leadership.
What is especially troubling about the article was the de facto stance that the city was going to charge ahead regardless of the likelihood of multi-million dollar lawsuits. The state law is clear that the legislature grants the city home rule powers under very specific conditions and that pensions must be agreed upon by them. The city agreed to that long ago and has yet to convince the folks meeting in Austin every two years to change this law. Further, the police and municipal workers are now on notice that the city was clearly planning to reduce their benefits yet again despite good faith efforts to work with city officials when times are tough. Houston has the lowest direct pay and pension benefits of a major city for all three branches of local government, fire, police, and municipal, now so further reductions will cause an even greater impact.
The city already owes the HFD pension system about $500 million, double that for HPD, and more than double that of HPD for the municipal workers. Had the mayor and council shown the slightest bit of fiscal restraint over the years, funding would be far less of a problem but there comes a time when being the low cost leader in employee compensation hits a wall. The latest “offer” made by the city in contract negotiations with HFD was to cut their overtime, assignment pay, and force them to save up more of their time off in exchange for a modest 4% raise, the city saving the equivalent of about 6% from what I’ve been told. Such a great deal, huh? I suspect the police will encounter a similar offer although they gave up 4 weeks of vacation time (3 weeks in absolute and another under conditions) on their last contract and their pension was decimated ten years ago.
If citizens don’t want quality service, by all means just be open about it because HFD ranking #146 or so in pay already makes it a tough sell for the best workers, 40% able to walk away over the next year should major changes be implemented for existing employees. The kind of up front pay needed to get approval to lower pensions for newcomers would be deep double digit and unlikely to occur, Austin knowing how the more local control Houston gets on a pension, the worse funded said pension becomes as evidenced by the other two.
Well I guess keeping the status quo is fine since everyone refuses to acknowledge the problem which will hit in 20-30 yrs. Yes for the older people they don’t care but for those of us who plan on being around then it is scary.
http://www.economist.com/news/united-states/21604165-can-rahm-emanuel-save-chicago-financial-calamity-rahmbos-toughest-mission
We are not Chicago yet but we will be. Also the pensions are lying/playing games with their liabilities, go see the discount rate they are using to quantify that number. They are using 8% or so when they should be using something closer to 5%. Have the actuaries show you what the true liabilities are at 5% and then you will see a troubling number in terms of how much we are underfunded.
Steven
can you provide the citations for all of your facts? I honestly would like to see those reports
Thanks
Oh, and Kuff, the reason you did not see a story in the Chronicle about the city losing the court case “with prejudice” was because the Chronicle has long championed Parker as well as anti-pension efforts. They took Bill King on a regular member of their editorial board and constantly sing the praises of John Arnold and his goons who seek to greatly reduce pensions. It is clear that many of the articles printed in the paper were either written in conjunction with the mayor’s staff or relied heavily on such staff to generate them while refusing to print most rebuttals.
If Houston were way ahead of other cities in terms of total compensation, the tea party cries of greedy employees, evil unions, and other knee jerk rhetoric might be better founded but even in historically low paying Texas cities, Houston pays less from entry to retirement by a significant margin. As the economy continues to heat up, good workers will look elsewhere or just use the city as a training ground before leaving for greener pastures.
John, HFD’s pension has had historic returns on investment exceeding the 8.5% consistently bringing in much more. You can view those numbers at http://www.hfrrf.org/default.aspx , HPD has averaged more than 8.5% over time too and you can look at their numbers at: http://hpops.org/ and the municipal plan at http://hmeps.org/ (under “publications” for each). In each case, independent actuaries have evaluated their pension systems to provide a true and accurate picture of their finances. If you have some reason to believe these firms are violating the law, by all means contact the state attorney general’s office for action but no credible source has suggested it to date.
In terms of the specific quotes or sources of information, all of what I said is part of the public record. You can file a public information request act with the city, look at Kuff’s archives and the Chronicle’s own articles to verify virtually everything I stated, city by city comparables in compensation published several times in recent years and all city contracts with employees available online. Unlike others online, I do not expect anyone to merely take my word for any of this, I simply provide a framework for those so interested to research things for themselves and draw their own conclusions. I have been a regular commentator here for years and built up enough of a reputation that Charles sees fit to quote me at times (thanks buddy!) but I admittedly have a bias towards the workers of this city who have given back so much, so often, and in so many ways.
The city often skews statistics in such a manner that combined with their Chronicle shills makes it sound like employees have a gun to the head of city leaders. Nothing could be further from the truth and despite the empty rhetoric comparing Houston to Detroit or Chicago, both cities compensating employees better than Houston by the way, the biggest problem is those lovely term limits passed into law 20 years ago. They force those in office to take a short term look at the financial picture and kick the can down the road, letting someone else deal with any issues. That way, they can spend on frills and dole out largess to keep getting elected so when the bills come due, they are in higher office where they won’t be held accountable. Look at who pushed hardest for city term limits too; those living in the county, not city, at least according to the PAC reports published years ago…