Not quite there yet, but getting close.
Houston’s police and municipal pension boards have agreed to a landmark reform package produced over months of intensive negotiations at City Hall, and Mayor Sylvester Turner hopes the firefighters fund will follow suit with a vote Monday.
The pending proposal, which puts Houston the closest it has come to solving a 15-year crisis that has contributed to recent credit downgrades and threatens to bust the city budget, would eliminate Houston’s pension underfunding in 30 years and avoid more than $2.5 billion in future costs by reducing benefits.
It would also limit the city’s exposure to future market downturns by assuming more realistic investment returns, and calls for issuing $1 billion in bonds to help close the funding gap.
The deal also includes a hotly debated provision that would require future benefit reductions or higher worker contributions if a market downturn or other factors drive the city’s contributions above a specified cap.
The next step is to take the agreement to Austin in the form of legislation, as city workers’ pension benefits are enshrined in state statute.
“We all recognize that the course we were on was going to be destructive for everyone,” Turner said, making a rare appearance at a City Council committee discussing the reforms Thursday morning. “We all had to recognize there were going to be some changes. We tried to strike a balance. Under this plan there is certainty for all employees that there’s a retirement system they can count on that is reliable and sustainable, and we do not have to have this system be a political football year after year. I wish at the end of the day we didn’t have to make any changes at all, but that would be naive and unrealistic.”
Police and municipal pension officials declined comment.
Fire pension chairman David Keller said he can see his board’s vote Monday being decided by one member, or by a wide margin.
“I wish I had a crystal ball on this, but I really don’t know. It’s just hard to gauge what the outcome would be,” he said. “We’re proceeding with a great deal of caution.”
If Keller’s board rejects the deal, city officials say it’s not clear precisely what would happen, but sources close to the talks said the mayor has made clear to the firefighters fund that intransigence on a mutually agreed deal could result in the city writing less generous terms into the legislation on the fire trustees’ behalf.
Houston Retired Firefighters Association president Nick Salem said his group accepts changes must occur, but is troubled by one of the several dozen benefit tweaks: A change that would reduce annual cost-of-living adjustments for firefighters who retired before 1997, prior to the generous benefit increases that first caused pension costs to skyrocket after 2001.
About 600 of Salem’s 3,100 members fall into that category, and he said many are near the poverty line. Retired Houston firefighters do not received Social Security benefits.
“We don’t want to get in a big fight and kill this whole deal with the city because we want a deal with the city, but we’re having severe issues with this,” Salem said. “Some retirees are living on $1,000 a month. We’re not against the deal, but we’re against this one particular part. We’re trying to figure out what we’re going to do about it.”
See here, here, and here for the background. The firefighters have always been the main challenge here, as they have the most to give up and the strongest starting position. Let’s just say there will be a lot less turbulence, here and in Austin, over the next six to eight months if they ratify the deal on Monday.