Houston pension bill moves ahead despite flaws
Sylvester Turner
Houston Mayor Sylvester Turner  went to Austin Monday to convince lawmakers that  he  has hit upon a solution to Houston’s $8.1 billion pension problem.
 His  answer is math — really complicated but ultimately pointless math.
Last September   Turner  promised a hard cap on the city’s pension liability and a fixed 30-year repayment plan. Instead   he  has delivered a bill that would allow debt to continue to accrue and repayment to be put off indefinitely.
The city is as exposed to bankruptcy as ever  as  Turner ’s plan primarily deals with what checks get written when  not with the massive debt that continues to mount.
State Sen. Joan Huffman filed a bill last week containing  Turner ’s plan  with one addition opposed by both  Turner  and the Houston unions: a requirement that the city get voter approval before issuing $1 billion in pension obligation bonds.
 Turner  promised an end to that with the equivalent of a fixed 30-year mortgage.  He  delivered  but there’s a catch: Houston can take out second mortgages  third mortgages  and so on in perpetuity  each with a new 30-year repayment period.
And  Turner  would like to kick off this journey to solvency by putting  his  next house payment of $134 million on the credit card  so to speak.
The upside of the plan is that  Turner  has won some concessions. The police and municipal employees unions are willing to trade some of their IOUs (payable by taxpayers) for cash up front at a steep discount. The firefighters union has decided to oppose the plan  but Huffman said Monday that they “will have to be brought along kicking and screaming.”
While  Turner ’s bill achieves some concessions  it doesn’t deliver the promised features.
“We cap the city’s exposure ”  Turner  told the committee. “The bill says that the parties are obligated to come back to the table and they shall adjust their benefits to stay within the corridor ” which is a separate cap limiting the city’s pension payments to 37 percent of payroll.
 Turner  said Monday that if  he ’s not able to use a pension bond to cover a $134 million pension contribution that’s due  then “a lot of people will not be working.”
He pointed out that the plan lacks a 401k-like “defined contribution” plan for new hires. That’s one of the easy first steps that struggling localities elsewhere have taken  but which  Turner  rejects for ideological reasons.
A few experts have noticed that  Turner ’s plan  if tweaked  could be used to impose a defined contribution plan through the back door. That is  in setting a defined maximum the city will pay each year  the city could be defining its contribution. But the liability loss layers would have to be stripped from the plan.
[TGT]went to Austin Monday to convince lawmakers that  [TGT]  has hit upon a solution to Houston’s $8.1 billion pension problem.
 [TGT]  answer is math — really complicated but ultimately pointless math.
Last September   [TGT]  promised a hard cap on the city’s pension liability and a fixed 30-year repayment plan. Instead   he  has delivered a bill that would allow debt to continue to accrue and repayment to be put off indefinitely.
The city is as exposed to bankruptcy as ever  as  [TGT] ’s plan primarily deals with what checks get written when  not with the massive debt that continues to mount.
State Sen. Joan Huffman filed a bill last week containing  [TGT] ’s plan  with one addition opposed by both  Turner  and the Houston unions: a requirement that the city get voter approval before issuing $1 billion in pension obligation bonds.
 [TGT]  promised an end to that with the equivalent of a fixed 30-year mortgage.  [TGT]  delivered  but there’s a catch: Houston can take out second mortgages  third mortgages  and so on in perpetuity  each with a new 30-year repayment period.
And  [TGT]would like to kick off this journey to solvency by putting  [TGT]  next house payment of $134 million on the credit card  so to speak.
The upside of the plan is that  [TGT]has won some concessions. The police and municipal employees unions are willing to trade some of their IOUs (payable by taxpayers) for cash up front at a steep discount. The firefighters union has decided to oppose the plan  but Huffman said Monday that they “will have to be brought along kicking and screaming.”
While  [TGT] achieves some concessions  [TGT] doesn’t deliver the promised features.
“We cap the city’s exposure ”  [TGT]  told the committee. “The bill says that the parties are obligated to come back to the table and they shall adjust their benefits to stay within the corridor ” which is a separate cap limiting the city’s pension payments to 37 percent of payroll.
 [TGT]  said Monday that if  [TGT] ’s not able to use a pension bond to cover a $134 million pension contribution that’s due  then “a lot of people will not be working.”
[TGT] pointed out that the plan lacks a 401k-like “defined contribution” plan for new hires. That’s one of the easy first steps that struggling localities elsewhere have taken  but which  [TGT]  rejects for ideological reasons.
A few experts have noticed that  [TGT] ’s plan  if tweaked  could be used to impose a defined contribution plan through the back door. That is  in setting a defined maximum the city will pay each year  the city could be defining its contribution. But the liability loss layers would have to be stripped from the plan.