HOUSTON (AP) - Two Houston pension boards this week approved landmark reform that could resolve a 15-year crisis that’s contributed to recent credit downgrades and severe strains on the city budget, according to a newspaper report Friday.
Details of the plan were revealed Thursday and are meant to end Houston’s pension underfunding in 30 years and eliminate more than $2.5 billion in future costs by reducing benefits. The measures would limit the city’s exposure to a market downturn by assuming more realistic investment returns, and they would require the issuance of $1 billion in bonds to help close funding gaps.
The deal also includes a provision requiring benefit reductions or higher worker contributions if a market downturn or other factors push the city’s own contribution above a specified cap, the Houston Chronicle reported (https://bit.ly/2ergbmj ).
Houston’s police and municipal pensions have given their consent and the firefighters’ pension board meets next week to vote on the reforms. The state Legislature must also give its OK.
“We all recognize that the course we were on was going to be destructive for everyone,” Mayor Sylvester Turner told a city council committee Thursday. “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.”
The chairman of the fire pension board, David Keller, told the Chronicle that he can see Monday’s vote being decided by one member, or by a broad 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.”
Other pension boards in Texas also are facing significant problems. The Dallas police and fire pension board this month asked that city taxpayers contribute more than $36 million to pay for the pension fund’s overhead costs.
Dallas taxpayers may need to ultimately contribute hundreds of millions of dollars in additional funding to keep the pension fund solvent. About $115 million already is contributed to the fund each year by the city.
The $2.39 billion fund may become insolvent by 2028, The Dallas Morning News has reported. It became further unsettled by a rash of recent lump-sum withdrawals by retired police and firefighters wary of the fund’s troubles.
The fund was undermined in recent years by overvalued investments and risky real estate deals.
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Information from: Houston Chronicle, https://www.houstonchronicle.com
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