By: Mayor Sylvester Turner
Earlier this week, City Council members joined in a bi-partisan vote of support for a historic package of pension reforms. With this vote, Houston is on the verge of accomplishing what few other cities have done – solving its multi-billion dollar pension challenges permanently and without requiring a tax hike.
My office, City Council, the employee pension systems, the business community, the Arnold Foundation, The Kinder Institute and others who have been pushing for a solution for years have all reached the same conclusion – this plan fixes what needs fixing. This is the first time ever that all concerned parties have been on the same page and moving forward in unison. It is one big family working together for the betterment of Houston and its citizens.
We are talking about eliminating nearly $8 billion of unfunded pension debt that is draining the City’s bank account, contributing to a decline in our credit rating and higher borrowing costs and hindering our ability to pay for the services our citizens not only need, but deserve from their City government. This plan will provide the City with structural budget balance moving forward. It provides employees with secure and stable retirements and provides taxpayers with a plan they can afford. We are taking an absolutely unsustainable financial situation and making it sustainable.
A small minority wants to play politics with this issue. They say the numbers won’t work but yet provide nothing to prove that claim. They say we are moving too fast but fail to elaborate why. They say the plan has been crafted in secret while ignoring the vast amount of news coverage, social media discussion and position papers that have been widely distributed. Not one person has come forward with an alternative that reforms the City’s pension system, reduces costs now and in the future, has broad based support and does not require a tax rate hike.
Of course, the impact on taxpayers is a big concern, but it is insensitive to not also be concerned about the impact on our police officers, firefighters and municipal workers. They have put concessions on the table that have a real impact on their futures. In return for what they are giving up, taxpayers will have budget certainty. They deserve a big thank you for coming to the table. Like a fixed rate mortgage payment plan, our $7.8 billion pension debt will be eliminated in 30 years. We will immediately cut the cost of employee benefits by $2.5 billion. If future pension costs begin to exceed pre-agreed limits, there is a mechanism to force additional benefits changes. This cost management component is probably the most important piece of these pension reforms because it will prevent us from ever having to deal with this situation again. We will base our market performance predictions on a more conservative seven percent rate of return, we will fully fund each pension system every year and the pension systems will be required to share information so we are better able to gauge cost trends.
Houston built the world’s largest inland port, Houston put a man on the moon and Houston leads the world when it comes to medical breakthroughs. We can also be a model for all the other cities wrestling with pension challenges. Nothing in this plan increases our debt burden, increases our budget or increases the tax rate. We have come farther than anyone on this issue and as we now head to the Texas Legislature for the final step of enacting our local plan into law, it is time to put the politics aside and do what is best for the financial future of this great city, its taxpayers and its municipal employees.