The Pension Problem Solver: Mayor Turner Fixes Houston’s 16-Year Financial Crisis in Less than 2 Years

ABOVE: Mayor Sylvester Turner, along with members of Houston City Council, the Texas Senate, the Texas House and other hardworking people who assisted in the passing of the Houston Pension Solution bill

It took over 16 years, but it is finally done.

Prior to becoming mayor of the City of Houston, then-State Representative Sylvester Turner observed three other mayors’ attempt to solve a financial crisis that had put a damper on the City of Houston’s future, and that has been spiraling out of control for nearly two decades.

Turner, who ran unsuccessfully for a second time in 2003, campaigned heavily during the 2015 mayoral race, with a heavy focus on dealing with Houston’s pension problem – a large unfunded $8.2 billion liability with escalating costs that had been cited by credit rating agencies as a significant negative factor in the City of Houston’s fiscal outlook. Upon taking office in January 2016, passing pension reform remained a primary focus for Turner. He worked extremely hard behind the scenes to save the city from financial ruin, and with the stroke of Governor Greg Abbot’s pen on May 31st, Turner solved a problem that many of his predecessors couldn’t which turned the city’s financial future around.

“Today is a historic day because we have done what many said was impossible,” said Turner after Governor Abbot signed the bill into law. “Today’s significance is not marked by what we have accomplished, but by what we can achieve now that we have lifted a significant barrier to progress in our city.”

Getting to this point was far from a cake walk, and was not easy by any stretch of the imagination. First, Turner needed legislative approval to move forward, because control of the pension systems is housed in state statute. Secondly, it was supported by labor organizations representing city employees, two of the three pension systems (the Houston Firefighters Relief and Retirement Fund sued the city over the pension reform plan, calling it unconstitutional), and the Greater Houston Partnership, along with more than 40 CEOs and local business leaders who signed letters of support.

The Texas Senate and the Texas House of Representatives, then approved the conference report for Senate Bill 2190 – the Houston Pension Solution – with the Senate voting (25-5) and the House voting (103-43), with bipartisan support in both chambers. The historic bill then went to Governor Abbott’s desk for his signature, and now that he has signed, the bill is slated to go into effect July 1, 2017, which is the beginning of the 2018 fiscal year.

Multiple organizations negotiated specific components of the pension plan and worked diligently behind the scenes to help Turner get the deal done, while many naysayers had doubt that an agreement could be negotiated and passed during the recent legislative session, let alone be signed by the governor.

Turner and his team of experts worked meticulously to get the job done.

“I’d like to thank Chairman Dan Flynn, Chairwoman Joan Huffman, Speaker Joe Straus, Lt. Gov. Dan Patrick and all other members of the Legislature who helped Houston move this bill forward,” the Mayor said. “The Houston Pension Solution is an example of what we can accomplish when all parties join hands to resolve the important issues that face this City. It’s an approach we should continue to take on every issue we face. Houstonians have done what we always do when push comes to shove. We came together and put aside our differences to lift up our city and build a brighter future for our children.”

The Houston Pension Solution, which many financial experts have called a “national model” to help other cities reduce their unfunded liabilities, will immediately reduce the City of Houston’s $8.2 billion unfunded liability through future benefit reductions. Under the plan, which utilizes a more realistic 7 percent rate of return on investments, the City of Houston will be required to meet its annual contribution until the unfunded liability is fully paid off in 30 years. An innovative cost corridor concept controls costs for the City. The corridor serves a risk sharing mechanism – if investments perform too far below established levels, the pension boards will cut benefits or increase employee contributions to bring costs in line.

Although this was a significant development as it relates to the financial future of the City, Turner went on to say that there are more financial challenges to be dealt with ahead. Pension problems were one of two structural impediments cited by credit rating agencies as significant negative factors. The other is the City of Houston’s revenue cap, which requires the City to reject revenue.

“What passed today does not solve our fiscal problems,” said Turner. “We will still have to close a significant budget gap this year, and we project lean times in the next few years. However, passage of this bill lifts a tremendous burden on the City’s ability to fully serve all its residents. I will be asking voters this November to lift the revenue cap so that we can lift up our families, lift up our neighborhoods and lift up our City.”

This pension reform bill, adds another feather in Mayor Turner’s cap. Now with a proven record of accomplishments, in a short period of time, it shows Turner’s ability to hit the ground running after leading the City out of one of the worst budgetary challenges the City has ever seen. Without this bill’s passage, massive layoffs between firefighters, police officers and municipal workers were soon to come, which is something Turner warned Houstonians of if the bill didn’t become law.

Mayor Turner was sworn into office, having inherited a huge financial mess, with Houston in need of a leader who could sit up straight, roll up his sleeves and get to work. Turner kept his eyes on the prize by connecting budget to strategy, collaborating with both Democrats and Republicans, and solving a major financial issue in the City of Houston that was 16 years overdue.

That was one of Turner’s primary campaign promises – a promise he kept.