Bill King says yes to Houston’s Pension Obligation Bonds

Former City of Houston Mayoral candidate Bill King sent this to the InBox:

Proposed HCRP Pension Bond Resolution

As you have probably seen, a resolution regarding the modifications made to the Houston pension system has been proposed for adoption by the Executive Committee. Several of you have called to ask my opinion on the resolution.

As a threshold matter, I agree that the proposed pension bonds should be approved. These were part of the bargain made with the police and municipal workers in exchange for reductions to their benefits. It was a fair bargain and should be honored. Also, the financial consequences for the City at this point would be dire if they are not approved.

I also agree that SB2190 was an improvement from what we had before and crucially gave Houstonians the right to approve pension bonds. However, to suggest, as the recitals do, that it was “conservative reform”, will “stabilize the pension funds” or will move the City “toward defined contribution plans” is complete nonsense.

A “conservative” plan would have immediately moved all new employees to defined contribution plans like the private sector has done. A concept which was unanimously approved by the Executive Committee, but ignored by the Legislature. Senator Paul Bettencourt introduced a bill that would have allowed citizens to vote for defined contribution plans for new employees, but that bill died in Senator Joan Huffman’s State Affairs Committee.

And certainly, this plan does not “stabilize” funds, as it is based on an assumed rate of return of 7{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}. The plans’ 10-year average has been about 5.5{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}. The plan also continues to allow the City to negatively amortization its pension debt. SB2190 is yet another kick of the can on the City’s pension problems. When we get to the can again, the situation will be less severe because of benefit reductions contained in the plan. But let’s not kid ourselves, this plan is absolutely not a final solution to the City of Houston’s pension problems.

I find it somewhat ironic that the resolution suggests that the bonds will not be new debt “because it will be used to pay off loans the City has taken from the pension funds in the form of deferred payments.” Well, the Texas Teacher Retirement System is now $41 billion unfunded. Does that mean State leaders have taken out a $41 billion “loan” from TRS?

Lastly, I would point out that SB2190 did something that has never been done in the State of Texas before. It took away benefits that had already been earned by employees and retirees. The representatives of the police and municipal workers negotiated those reductions in exchange for the bond money. But the benefits of the fire fighters were cut by about $150,000 per fire fighter over their objection and without them receiving anything in exchange.

The Republican Party has historically stood for the sanctity of contract; as well it should. When someone has provided years of service, their benefits should not be changed after the fact. SB2190 stripped away benefits that Houston fire fighters had earned and which they had been promised, including widows of fire fighters. We can argue whether the benefits were reasonable or not, but in Texas a deal is a deal. Allowing the City to not honor that the promises that were made to fire fighters is hardly something to be celebrated or lauded. And especially not in the wake of the service that so many of them rendered in the recent flooding.

I am going to reluctantly vote for the pension bonds. I am not happy about it and I will never vote for pension bonds again unless they are tied to a conversion to defined contribution plans. But I believe approving these bonds is the right thing to do under the current circumstances.

But for the Executive Committee to adopt a resolution referring to SB2190 as “conservative reform” or suggesting that it has “stabilized the pensions funds” or “moves the City toward defined contribution plans” is simply not true and would be incredibly misleading to the public.

If you would like to review exactly what SB2190 did and did not do, I wrote an lengthy summary of the bill which you can review at http://billkingblog.net/2017/06/09/houston-pension-bill-as-passed/.

If someone forwarded you this email and you would like to be added to my distribution list, please send me your email address at [email protected]. Also, previous emails are posted at www.BillKingBlog.net.

So, he is ‘reluctantly’ going to vote FOR the pension bonds. Sigh. If you are looking for a leader on this issue, it isn’t Mr. King.

Compare his fence-sitting thoughts with those of HCRP Chair Paul Simpson. Simpson is unequivocal in his support of these bonds and provides his reasoning. King is ‘reluctantly’ going to vote for them at the same time he criticizes Simpson and others for supporting them. If there is one thing King says that I agree with, it is that ‘in Texas a deal is a deal’. But in the next breath he says he is going to vote for something that breaks the deal that was made with these unions.

There is so much confusion surrounding these bonds that I wouldn’t know what to do if I were a voter in the City of Houston. At some point, voters need to be given the facts. Unfortunately, I haven’t been able to determine what the facts are. And neither has anyone else that I have seen. The entire argument seems to be based upon emotions from elections lost long ago.

I hope that someone, anyone, will put out the facts about these bonds before early voting starts. Unfortunately, it doesn’t look like that is going to happen.

All a voter can do is look to those that they respect for help. Good luck.