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Pension reform law reinstated by appeals court

A win for the city.

Mayor Sylvester Turner

A state appeals court on Tuesday tossed out a ruling that jeopardized part of Houston’s pension reform plan, reversing a victory the firefighters’ pension board had scored in late 2020.

The Houston Firefighters’ Relief and Retirement Fund had argued that legislation passed in 2017 as part of Mayor Sylvester Turner’s pension reform package prevented the board from determining “sound actuarial assumptions” — projections of future pension costs and benefits — by itself, which it said violated the Texas Constitution.

Texas’ 1st Court of Appeals ruled Tuesday that the Constitution does not give the board an exclusive right to determine those assumptions, upholding the law.

[…]

The dispute involves Turner’s landmark pension reform legislation passed in 2017. Among other things, the legislation affected how much money the city contributes to the police, fire and municipal pension funds each year. The changes to that part of the law dictated some of the actuarial assumptions that must be used in that calculation, including a 7 percent assumed rate of return on investments. It also set a process for determining the rate when the pension board and the city actuaries offered differing proposals.

The board, though, argued that the Texas Constitution gives it “exclusive authority” to choose actuarial assumptions, and therefore the new law violated the Constitution by giving the city a role in that process. The Constitution says pension systems “shall… select… an actuary and adopt sound actuarial assumptions to be used by the system or program.”

In Tuesday’s ruling, Justice Richard Hightower said that is not the case. The ruling marks the second time the challenged provision has been upheld by appeals courts.

“(T)he word ‘shall’ does not, by itself, mean or imply ‘exclusive authority,’” Hightower wrote. “The commonly understood meaning of ‘shall’ does not imply that the party with a duty to perform — who ‘shall’ perform — does so exclusively or that the duty cannot be regulated.”

See here for the previous update, and here for the opinion. Given that it apparently turns on the definition of “shall”, I did not read it, on the expectation that my eyes might permanently glaze over. The firefighters have vowed to appeal to the Supreme Court. Given that it took almost two years to get an opinion on the previous appeal, you can guess for yourself how long it will likely be before the next update.

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2 Comments

  1. Jonathan Freeman says:

    Given the amount of underfunding over so many years, I think the city should’ve used the provision in the statute requiring sound actuarial assumptions as their primary argument. Those in favor of old style pensions always want to use years of great market returns while those wanting new style pensions want to use years where returns were low or even negative. The reforms seem to be having a positive impact on city finances even if some employees are unhappy.

  2. David Fagan says:

    Where is the report on how the Houston Fire Department is now offering hire-on bonuses, Kuff? That is also a historic first for The Houston Fire Department.