Houston Mayor Pitches Tentative $7.7 Billion Pension Reform Plan

HOUSTON, TX -- Houston Mayor Sylvester Turner followed through with his pledge to reform pension under-funding for city employees, with the roll-out of his proposed $7.7 billion pension reform plan on Wednesday.

"It's my plan to meet a resolution with all of the stakeholders by the end of fall 2016 in time to take that resolution to Austin for them to ratify," Turner told the Houston Business Journal.

The plan, which is designed to eliminate $5.6 billion in unfunded pension liability within 30 years, would also reduce benefits avoiding more than $2.5 billion in future costs, and include the issuance of at least $1 billion in bonds.

Houston's pensions have been a hardship to the city’s economy for more than 15 years, when flawed cost projections led city leaders to agree to increase benefits, only to see costs rise significantly.

Since then, the city has failed to consistently make full payments into the funds, despite benefit cuts for some new hires in 2004, and again in 2007.

Earlier this month, Turner met with pension boards for the Houston Fire Department, the Houston Police Department, and Houston Municipal Employees, and asked that each restructure their benefits packages, which would decrease the unfunded liability by one-third.

"The beauty of the plan is that you allow the employee groups to come up with suggestions that are in their best interest, but it achieves the objectives of the city," Turner said.

The leaders of each of the pension boards have reached “preliminary points of understanding” about the reform package but have not identified specific benefit reductions.

Each fund's board of trustees would then need to approve the changes, as would the state Legislature, which controls the city's pension system.

"Never has the city reached this point in the last 15 years, making significant, sustainable recommendations and changes, and never have we been more unified," said Turner. "Now, are we 100 percent unified today? No. But we are much more unified today than we have ever been."

Meanwhile, representatives of the police and municipal employee pension boards stood with Turner on Wednesday as a show of solidarity, but would not comment on the proposal.

In a letter written to members of the Houston Fire Department, Fire pension chairman David Keller said members that the board's trustees did not attend "because we are not comfortable portraying to the membership or the public that we have reached a deal."

Once a deal is reached, Turner will make his proposal to the state legislature which convenes in January.