Council ratifies Turner’s pension plan

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Mayor Sylvester Turner

On a 16-1 vote, Houston City Council has endorsed Mayor Sylvester Turner’s historic package of pension reforms. The vote clears the way for the City to move forward in partnership with the pension systems to seek legislative approval of the reforms.

“I am bubbling over on the inside,” said Mayor Turner. “I am thankful to everyone who has helped get us to this point. That includes City Council, the pension systems, our City employees and many others. This plan is historic, transformative and budget neutral. We are solving our pension problem permanent and we are doing it without needed a tax rate increase. There is no other plan out there offering the same benefits. The Houston solution can be the model for other cities with similar challenges.”

The police, fire and municipal pension systems all signed off on the package of reforms prior to today’s City Council vote, marking the first time that the City and all of the pension groups have been united.

The plan immediately reduces the City’s nearly $8 billion pension debt by over 30 percent and then sets a 30-year fixed payoff schedule for the remaining $5.3 billion of debt. This immediate reduction is accomplished through a combination of benefits changes that include scaling back cost-of-living adjustments, higher employee payroll contributions and phasing out of the Deferred Retirement Option Program, known as DROP, which allows employees to accept retirement benefits while continuing to work for the City. In return for the concessions, the City has agreed to issue $1 billion in Pension Obligation Bonds to make up for years of prior underfunding of the pension systems.

“It is a big deal that employees have agreed to these benefit changes,” said Turner. “I know this has not been easy, and I thank each of them for their patience, understanding and service. This plan will provide stable and sustainable retirements at an affordable cost to the taxpayers who foot the bill. Retirees won’t have to worry if the check will be there.”

Moving forward, predictions about the anticipated performance of pension system investments will be based on a more conservative seven percent assumed rate of return. If there are market changes that cause costs to exceed pre-agreed limits, there is a mechanism to force additional changes in benefits to bring everything back in line. A requirement that both sides share information will ensure compliance with the required 30-year payoff schedule.

State Senator Joan Huffman and State Representative Dan Flynn are expected to carry the Houston pension legislation. Bill filing for the 2017 legislative session begins mid-November 2016.

See here and here for the background. CM Mike Knox was the lone No vote, saying he couldn’t support it without there already being a bill written. The Chron story fills in a few details.

Turner secured the political chip of a prompt and lopsided endorsement by using an impassioned speech to persuade Councilman Michael Kubosh to remove his “tag,” a parliamentary maneuver that would have delayed the vote. Kubosh had said he initially tagged the measure at the request state Sen. Paul Bettencourt, a Houston Republican who has called for a delay until more information was available on the reform plan.

“Either you all are going to represent the people of the city of Houston or – I’m going to borrow your term Councilmember Kubosh – are you going to represent political interests? I stand with the people of the city of Houston,” Turner said. “I was voted (in) to represent their interests, not some party affiliation or some political interest or somebody who wants to be mayor.”

Turner’s comments plainly were directed at Bill King, who was runner-up in last year’s mayoral race and who joined Bettencourt at his news conference. The duo said the detailed reform proposals were public for too short a time and too vague to be properly vetted, particularly a key “corridor” provision that would force benefit cuts in the future if a market downturn led the city’s payments to increase above a specified threshold.

King and Bettencourt say the city should switch new hires to retirement savings plans similar to 401(k)s, but acknowledged a well-written “corridor” provision could offer the same benefits to the city.

[…]

Most council members, however, referenced the briefings they had received on the plan and echoed Turner’s point that no public speaker in the six weeks since the reform outline was first announced had appeared before City Council to criticize it.

“I want to make sure the public understands we have been briefed, and it wasn’t a 24-hour-ago briefing,” Councilwoman Brenda Stardig said.

Councilman Dave Martin, like Stardig, a conservative, offered even stronger comments.

“I did not vote for you. I did not support you. I’m supporting you 100 percent on this,” Martin told Turner. “I think it’s ridiculous for people to criticize this plan. It’s been transparent; it’s been thorough. We’ve been diligent. We don’t need any more information. Maybe the state does, but do your homework.”

Yeah. Just as a reminder, the Kinder Institute has analyzed the plan, so we are not operating in an information vacuum here. I’m sure if Sen. Bettencourt had called the Mayor’s office and asked for a briefing, he’d have gotten it. But it’s easier to preen than it is to prep, so here we are. My guess is we’ll see bills get pre-filed for this, probably in November, so we’ll know soon enough what that will look like. The next question is who will support it and who will try to kill it. The games have just begun.

Related Posts:

• House hearing for pension bill
• Pension reform bill passes Senate committee
• Council’s pension meeting