Despite skyrocketing costs and staggering debt in Houston, the mayor is taking an absolute position opposing reforms that would offer greater security for government employees and lower costs for taxpayers.
Sylvester Turner’s comments came during a House Committee on Pensions meeting in Houston on Monday to discuss possible areas of reform and seek public input.
“I will not consider proposals that eliminate the city’s defined benefit plans,” Turner declared.
Echoing Turner, Terry Bratton the Chairman of Houston Police Officers Pension System (HPOPS) said, “the [defined contribution] plan is just not on the table for us.” Their out-of-the-gate uncompromising attitude is why Houston’s pensions systems are where they are—on the brink of fiscal ruin.
After the private sector faced pension-insolvency driven by massive unfunded liabilities in the 1970s, they abandoned defined benefit plans to safeguard their employees’ fiscal future. Some governments and their unions have unwisely clung to the old system, which are now widely recognized as dangerous ponzi-schemes.
The benefits promised in Houston’s current pension systems are excessive. For Houston municipal employees, upon retirement their monthly benefits are the average of 78 of their highest pay periods over their entire career. The reality is that if the systems continue on their path without reform then pubic employees won’t have their pensions to count on.
“Public employees deserve a fair and secure retirement, but the current system promises workers anything but,” said James Quintero, Director of the Center for Local Governance at Texas Public Policy Foundation. He went on to say, “Texas’ defined benefit pension systems have racked up more than $60 billion in unfunded liabilities.”
Unfunded liabilities are the promises made to beneficiaries that the government projects it does not have the resources to cover. The central problem with defined benefit plans are that officials make faulty assumptions and baseless promises at the expense of taxpayers, without setting all the money aside for their employees.
Low returns on investments, diminishing contributions, increasing liabilities (which now total more than the city budget), and a maturing workforce are what the current system faces.
Pension system representatives lead their members to believe that the switch to defined contribution will “take away their benefits entirely” or lead them to “living off of $29,000 a year,” but that’s simply not true. In fact, reform efforts are aimed at lowering costs while making employees benefits more secure.
The reform gaining the most support is a gradual system change. While current employees and retirees will keep their existing benefits, future employees would be placed on a system that requires them to contribute more to their own future, while fully-funding and guaranteeing their own retirement.
State Sen. Joan Huffman (R-Southside Place) said she intends to be the Senate sponsor of a pension resolution bill.
Turner is a staunch defender of the promises made to Houston’s municipal workers and their unions, which isn’t surprising because that’s who got him elected, but he still has a duty to do what’s best for Houston’s taxpayers. Later in his testimony Turner said, “I will not sacrifice the good in search of the perfect.”
Such false choices distract from the facts. The current system is failing, and if reform opponents are serious about restoring solvency to pensions, they’ll join the effort in finding a solution.
If Turner wants “shared sacrifice,” a defined contribution plan needs to be thoroughly explored. Ignoring the structural defect of Houston’s pensions systems is not good governance, it is costly for taxpayers, and puts the future of the employee’s he claims to represent, at risk.
