In case you haven’t heard, there is an election starting next week around the state. In addition to a few changes to the Texas constitution, the City of Houston has a few fairly important items on the ballot regarding the city’s finances. One of those items addresses the shortfall that the city faces in its various employee pension funds by allowing the city to sell what is commonly referred to as Houston Pension Obligation Bonds. I had no idea how emotional people could get about this issue until this morning when I was called a stupid motherf**ker and accused of being paid to support the passage of this item. All because I said that if I lived in the city limits, I’d vote for the bonds. Well then.
The thing is, those types of emotional outbursts are the only ‘arguments’ I’ve heard against the passage of these bonds. Let them eat sh*t! Let them file bankruptcy! The taxpayers are bleeding! Libruls! Etc.
On the other hand, the very diverse group of people supporting passage are dealing in honest debate. Not a single one of them says that the agreement passed by the Legislature in the 85th Session is the be all, end all of the problem. They all acknowledge that the path forward is fraught with pitfalls and barriers and will continue to need to be monitored and adjusted. But they are willing to set aside various concerns and have worked out a compromise that while somewhere short of perfect, doesn’t leave either the taxpayers or the pensioners eating sh*t.
Back in November 2015, Governor Greg Abbott appointed economist Josh McGee to the State Pension Review Board and named him chair. Mr. McGee’s day job is as a Senior VP with the Laura and John Arnold Foundation focusing on evidence-based policy and public finance. Evidence-based. Imagine that. In addition, he is a Senior Fellow at the Manhattan Institute for Policy Research, a think tank whose mission is to develop and disseminate new ideas that foster greater economic choice and individual responsibility. He also holds a B.S. and an M.S. in industrial engineering and a Ph.D. in economics, all from the University of Arkansas. I say all that to say that maybe, just maybe he isn’t one of us stupid mf’s.
Before the Legislature’s final vote on the plan to reform Houston’s pensions, Mr. McGee wrote a paper titled A Pivotal Moment: Assessing Houston’s Plan for Pension Reform. It is a thorough look at the plan, its benefits, its problems, gaps, probabilities of success or failure, warnings, etc. The paper isn’t a tedious academic analysis, it is forthright and very readable. Click on it and see for yourself.
After the bill allowing the Houston pension reform was approved, Mr. McGee wrote an op-ed for the Houston Chronicle titled Pension plan is a sign of progress.
These days, many people are sick of politics. They think partisan posturing and political gridlock make it impossible to get anything done. But local and state leaders recently proved those naysayers wrong. Our elected officials showed the people of Houston, and indeed the nation, that they can – and will – come together when the future of our city is at stake.
Rising pension costs could all but bankrupt Houston. The $8.2 billion pension debt is four times more than the city’s total general fund revenue – and last year, Houston closed its books with an operating deficit for the first time in history. The city’s estimates indicated that in order to deliver on benefit promises, its pension contributions would total nearly 60 percent of payroll for the police department and close to a whopping 70 percent for the fire department. Facing the prospect of massive tax hikes, sweeping layoffs and deep benefit cuts, the need for reform took on a new sense of urgency.
The entire Houston community – including area business executives, labor leaders, finance experts, members of the Houston legislative delegation and city officials – knew there was no easy fix. They would need to work together to make extensive changes in order to solve the problem.
…
Clearly, there is a lot more to do – but let’s take a moment to acknowledge the significance of what local and state leaders have accomplished. Despite opposition from firefighters, city leaders and members of the police and municipal employee pension plans put the collective good before their own interests. They took on a contentious issue and did what their predecessors could not do. In an era of political polarization, they set aside their differences and figured out how to not only pay down the debt, but protect the city’s financial future.
As an economist with a focus on retirement security, I’ve worked with numerous cities and states facing similar pension challenges. They all want to know: How do we get people to come together and address this? I now have a new answer to that question: Look at Houston.
It is also important to note that Mr. McGee isn’t some disinterested academic in regards to this specific instance of pension reform. He lives in Houston and thus has a vested interest as a taxpayer. He is one of many non-stupid mf’s that know about public pensions that live and work in Houston, that are accessible and support this reform.
Lest you think that he is some paid shill for the unions, you probably should read Promise Breakers: How Pew Trusts Is Helping to Gut Public Employee Pensions.
Josh McGee, a vice president at the Arnold Foundation and Draine, the Pew Center’s lead pension researcher, have appeared together at informal meetings and before state legislatures and city councils around the country. McGee and Draine typically turn up with studies and PowerPoint presentations that support scrapping defined benefit pensions in favor of 401(k)-styled contribution plans, cash-balance accounts or hybrid plans.
Or perhaps read Josh McGee: Playing both sides in Houston on ProtectPensions.org:
The Texas Association of Public Employee Retirement Systems (TEXPERS) and the firefighters, police officers, nurses, and other public employees it represents, stood as an advocate against any proposed legislation that would switch to 401(k)-style plans. If TEXPERS hadn’t exerted its legislative clout, McGee’s conflicting role with the Arnold Foundation might have helped get defined contribution amendments into the Houston bill.
…
McGee praises leaders for saving their pension funds. That applause is drowned out by his cheers of defined contribution plans.
So I don’t think that anyone can honestly say that McGee is a paid shill for the unions in this matter. I know that won’t stop them but remember, I said honestly.
So should you vote Yes or No? Like I wrote here, that all depends upon whom you trust. Only you can decide that.
But the least you should do is know the facts. And I think I’ve given you enough information to discern the truth. You just have to use it.
Houston’s $8.2 billion pension debt poses significant risks to workers and taxpayers. Without reform, citizens will be forced to make difficult decisions between cutting public services and raising taxes, while workers’ retirement security could be compromised.
Local leaders should be commended for their efforts to reach an agreement and develop a proposal that would improve the pension systems’ financial stability. The proposal would accomplish key goals of responsible pension reform by establishing a plan to pay off Houston’s pension debt within 30 years and by providing a mechanism—through the financial corridor provision—to control future cost increases. However, more will need to be done in the future to establish a lasting solution to the city’s pension problems.
The city’s proposal is an important first step. If state legislators give local leaders an opportunity to implement reform, Houston city officials will need to uphold their end of the bargain. They will need to make payments on time and in full. In addition, they will need to deliver on the promised pension obligation bonds, as workers have already agreed to a number of substantial concessions and are poised to bear considerably more investment risk.
Going forward, Houston should make additional changes to reduce risk and protect workers, including limiting the amount of money allocated to volatile, hard-to-value assets. The city will also need to closely monitor the effect of the corridor provision. If the plans’ assumptions turn out to be overly optimistic and pension costs dramatically rise over time, the corridor provision could place an undue financial burden on future workers. In such a scenario, the city and the pension plans would need to act quickly and make additional reforms to address the situation.
The city should also consider adopting retirement plans for new employees that are simpler and easier to manage. These plans would provide additional protections for new workers and taxpayers. While placing new employees in a Defined Contribution plan or a Cash Balance plan would not reduce current unfunded liabilities, it would help ensure that the city does not accumulate large and costly pension debts in the future. It would also provide Houston with the flexibility to respond to changing economic and demographic trends.
Mayor Turner and members of the pension boards have shown leadership in their willingness to address Houston’s pension problems. The issue now rests with the state legislature. There are just a few weeks left in the 2017 session—and without the ability to make changes to the pension systems on its own—the city is running out of time. Without changes, the debt could spiral into a full-scale financial crisis. The city cannot allow that to happen. Its financial future hangs in the balance and will be decided in large part in the next month.
Local leaders have made considerable progress. There is a deal on the table, and now is not the time to turn back. Houston’s proposal represents meaningful progress toward establishing a fair and sustainable solution to the city’s pension problems.
Paying off the pension debt will require shared sacrifice. The city must take action to improve the financial stability of its plans and protect workers and taxpayers. Pension reform in Houston would allow the city to deliver on its promises to workers and preserve critical public services.
Communities across Texas and around the nation are watching. If the Houston plan is enacted, it has the potential to serve as a model for others looking for solutions to their own pension problems.
Oh, one last thing. Did someone pay me to support the Houston pension bonds? Of course not. I’m a stupid mf for free, no funding necessary.
David: I’ve said it before and I’ll say it again. We’re in this mess because prior city administrations didn’t bite the bullet and fully fund the necessary pension contributions. It’s easy to underfund pension contributions in order to pay for current services without tax increases. And, the people who will have to take the political heat and make the hard decisions aren’t the ones shorting the pension plans.
Houston made deals with its city employees that included somewhat lower salaries in return for good pensions. Pensions are part of employee compensation as salary and vacation benefits.
Now, we have to clean up the mess.
This isn’t to say that city government should not take a hard look at the pension plans for future employees. Of course they should. There may be ways to improve pensions (although I truly believe that when an employer announces a “new, improved pension plan,” that’s code for screw the employees).. Future employees will be able to make informed decisions if they are presented with a different pension system.
But that doesn’t remove the obligation to fix the existing pension plans before the debt becomes even more overwhelming.
“Paying off the pension debt will require shared sacrifice.”
The only people that will be sacrificing are the tax payers that are being asked to take ownership of a problem they did not create. I might be more on board with accepting a massive tax increase if I knew the people responsible for this mess were held accountable but they aren’t even mentioned in the discussion.
F it. I’m voting no. I’m not going to agree a proposal to create new debt to pay off old debt and that is exactly what this is. I’m just glad David won’t be cancelling my vote.
Just pointing out that Bill King argued we should vote against the infrastructure bonds because they pay for everything and the kitchen sink – but nothing for flooding.
That’s really important. Everyone should read that link and vote no for the “improvement bonds.”
All right all ready, what a mess. But as much as I can see an inkling of hope in what is being presented. I can’t vote for throwing more debt on top of old debt. And I definitely do not trust City Hall i.e. Turner and cronies to be fiscally responsible at any time. I agree with a previous comment when do we hold Lee P Brown accountable ???
Been going down hill since then with every Democrat that has been elected. Can’t leave debt as the legacy and burden on my grandchildren
As they say, don’t confuse me with the facts!
vote No to all Sly’s Bond proposal.
It’s time to stop bailing out Politicians.
All 3 COH Pension plans were doomed to failure from 2002 on with the only ones understanding the certain failure were the Unions.
Love the police, fire and municipal workers but tax payers can no longer afford to be tricked by our Politicians in support of an unsupportable Pension death.
Don’t reluctantly agree to the City of Houston financial deat
Getting Our Tax payer money is “their addiction”.
Vote No.
Like the Just Say no to drug campaigns, just say No to Sly.
Time to start all over again.
Dave,
I will not curse you or call you names, but there are plenty of reasons not to vote for the POBs.
The biggest reason is the City of Houston does not have a revenue problem they have a spending problem. As bad as the deal Lee P. made was, there has been enough revenue flowing through the City to make the required payments. Unfortunately the City has failed to control other expenses. Whether it staffing levels which are not reduced in the Arson Department even though the workload is decreased by 50{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} over the last twenty years, supervisors telling auditors they refuse to supervise their direct reports because those reports know their responsibilities and shouldn’t have to be supervised. City employees using tax payer funded vehicles to commute from locations far outside the City, even as far as the Dallas Fort Worth metroplex. The Mayor proudly announcing he is awarding a little less than a half million dollars to artists, not for the commissioning of a great work of art, but simply because we really like artists. The list goes on and on.
The additional billion dollars from the POBs coupled with the union concessions will buy the City a few years, but even as you acknowledge, this agreement does not resolve the pension problem, and it most certainly does not resolve the City’s spending problem. To the contrary it will allow the City to continue spending in the same fashion.
The second biggest issue is trust. To skirt the property tax cap the City passes a rain tax and calls it a fee. All of the revenue from this fee was to be dedicated to reduce flooding. I recently heard Councilman Knox complaining that even he can’t get an accounting of where the money has been spent. There is no doubt that a significant amount of the revenue from this tax has not gone toward flood abatement. Additionally the Texas Supreme Court ruled over a year ago the ballot language was deceptive. The City has done nothing to address this.
How do today’s events affect our trust in the City? At today’s City Council meeting Mayor Turner, after promising not to raise taxes because the State came through with disaster funding, tried to raise taxes. A special thanks to Councilman Knox and all the City Councilman who stopped this.
Lastly we are asking our children and grandchildren to pay a debt we accumulated. I find this to be morally reprehensible.
This might surprise you, but even with all of this, I am actually undecided. As bad as everything is, this might be the only solution, but please keep in mind there are legitimate reasons to vote against the POBs.
The pension bods do not pile debt on top of debt. They reduce the outstanding pension obligation by $2 to 3 billion, depending on interest rate trends and financial market performance. The pension bonds also carry a lower cost because the interest rates are lower than the assumptions in the unfunded liability. That alone makes the bonds worth approving.
Just how do folks think prior administrations can be “held accountable” for under funding the pension plans? I am not aware of any provision in law to allow them to be sued for political decisions made while in office, and it’s not exactly legal to tar and feather them and ride them out of town on a rail. And that’s ignoring the fact that some of those responsible are dead and that none of them have the resources to cover the unfunded liability.
I see all sorts of claims that moving to a defined contribution plan would fix things, and that no one in the private sector gets COLA’s on their pensions. Converting to a defined contribution plan would certainly give certainty as to costs going forward. Converting would do nothing to help the current liability, and the claim that those of us in the private sector don’t get COLA’s is not really true. Just about all of us are going to receive Social Security, and those payments are adjusted periodically. Since police and fire personnel do not pay into social security, it would be very unfair to remove COLA’s entirely. I would continue to give adjustments for the portion of pensions that are roughly equivalent to social security, but remove it for the remainder. I would also move the eligibility age for the “social security” portion of the pension to age 62, which is how it works for most of us. In addition, I would discount the regular part of the pensions by 5{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} per year for each year under age 60.
With respect to the infrastructure bonds, regardless of what’s happened with Harvey, the City still needs to replace police and fire vehicles and maintain City buildings. The City isn’t going to fix flood issues on its own, there has to be a regional plan in conjunction with the Flood Control District, the County, and the Feds. Selling bonds and starting projects with no regional coordination would be foolish, I plan to vote yes on the infrastructure bonds. Those bonds are in several different propositions, so you can choose to vote yes for police and fire vehicle replacement if you think that’s important, and no on everything else.
You need to review your next statement from the Social Security Administration. It states very clearly that SS benefits will be reduced significantly under current law as there simply isn’t enough money. No amount of COLA’s will make up for that reduction.
I agree with David, no surprise since he is largely saying what I wrote here not long ago. It makes conservative fiscal sense to trade high cost debt for lower cost debt and billions in concessions. Anyone demanding a final solution might want to show us where they’ve taken that stance in any other political manner since that is not how the universe works. If their pensions don’t make the needed returns, they will be back at the table giving up “more”, this being the main provision HFD’s team demanded be removed while they agreed to most other cuts.
The belief that voters had no say is foolish since they had a say every election time but kept voting for the same people as long as term limits would let them. The demand to hold past elected officials accountable is fine except they broke no laws, the best you can do is make sure none of them are elected to office ever again, voters across the state rejecting Bill White, perhaps remembering how he bragged in an op-ed how he “never intended to fully fund pensions”, Parker restricted in her political ambitions due to the fact that there are no positions for “kicking the can down the road”. Change the laws you don’t like but living in denial regarding the need to repair or replace facilities and live up to negotiated deals isn’t providing solutions either.
Sure, it’d be nice to see the city dismantle the TIRZ program that has had widespread support from Republicans and democrats alike just as it’d make sense to me to stop funding arts with a dedicated hotel/car rental tax or demand city officials stop duplicating county and state programs. And who can argue with Fred’s point about departments continuing to waste manpower on things that have markedly decreased like arson investigations? Turning down these bonds won’t change any of that, the buildings the infrastructure are fixing or replacing only going to get more expensive over time. Why not sell the zoo to Tillman to run more efficiently than the clowns running it now who expect millions in subsidies each year? And the “Rain Tax” was never to be dedicated to flood control no matter how many times that lie is repeated, but maybe it should be converted to such even if that won’t amount to much change in flooding, we need a regional approach to fix that problem and we all know it.
I never supported the TIRZ fiefdom schemes. And, I opposed the bonds for the stadiums and the Danger Train boondoggle. We now have a herd of “white elephants” that taxpayers are feeding. I have tried for eight years to get any elected official to support the idea of having a voter “quorum” when it comes to bond elections. I was able to convince the RPT to put the “25{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} of registered voters must cast a ballot, otherwise the bond can not pass” provision in the 2010 and 2012 State Platforms. The provision was purged in 2014, but it was revived in 2016.
Let me give you another perspective, people are already voting and it is with their feet. I started out living in un-incorporated Harris County to avoid living in Houston 25 years ago. For a very short time due to family needs on commutes and needs of the children I lived in Houston all of 7 years and during that time I watched the pension issue, I saw the mayors office put in a special judge and send out roving ticket writing patrols into neighborhoods where she wasn’t anywhere near the majority winner of the vote because they could write parking tickets for bull without losing her base. I saw during Ike my area used as a staging area to help other areas but not get a single bit of help and we even were on the last part of getting power restored and I have to feel it was for the same reasons.
What did I do after selling that house when the kids moved out, I moved back outside of the City of Houston and the number of people living around me who did the same thing for the same broad number of reasons that I didn’t list above because I would be into five or six pages worth of issues that I have proof on is not where it needs to happen. So folks some of the people who time and time again have been fleeced are already voting and they started voting a long time ago. There is no faith in the Mayor or the City Council and we voted with our feet, I am also voting with my pocket book and not shopping in Houston if I can avoid it.
Part of my successful career has been figuring out where it is best to build operations including large plants, Houston in Texas is headed to being almost as bad as LA and San Francisco don’t put anything in there because you are going to be looked at as a cow to be slaughtered when the debts come due. So don’t think growth is going to get you out of it companies are building around Houston not in Houston if it is a manufacturing base you need. The homes that could build the tax base are being built outside the city, we don’t trust the city to not flood us by using the funds collected to buy votes.
Shawn, if you have proof that the local power company that owns and maintains the electric grid played political favorites during Ike or any other storm, please come forth with the proof. Neither the city or county government has anything to do with that.
Second, despite frequent claims that people are moving outside the city limits of Houston, the net population continues to grow just as the prices of houses inside city limits soars. The economic laws of supply & demand tell us that this contradicts your beliefs.
Royko, why is it that those who live outside the city limits are the people most determined to see the city go to bankruptcy court? Still, you point out a truism regarding the candidates voters continue to pick, only term limits preventing most of them from serving endlessly, which proves those voters are responsible for the actions of their elected agents. Change state law to prohibit liberals from pilfering Metro coffers as Lanier did or prevent debt accumulation as the others did but don’t claim run of the mill voters aren’t responsible for the actions of those they continue to elect.
Peter D, a couple of quick comments, all of the people who live in our neighborhood moved there from Houston and made a concerted effort to buy a house that wasn’t in the Houston city limits. It includes law enforcement officers from Harris County Sheriffs department, local Constables, and DPS which is rather telling. As to the power restoration, the only thing I can tell you is that both the National Guard and the Power Companies were staging out of Tully Stadium, and it was over a week before we saw Power Crews in our neighborhood in spite of the fact that they were staging only a few blocks away. If you noticed I said in my first post that it was my opinion, I also saw your ‘opinion’ about people the people living outside of the city limits.
As far as the people moving out, the ones I am talking to are very fiscally conservative and they are all watching a city which is becoming more and more Liberal. So as far as the people moving habits it looks like polarization between the City and the surrounding areas from the admittedly very small statistical sample that I have spoken with down political spectrums. Oh and my spectrum, I am an Independent who is a fiscal conservative and a social moderate and I don’t trust either party.
Shawn,
your opinion is that during Ike, the liberal city leaders both sent out ticket writing squads and prevented Centerpoint from fixing your power lines, mentioning “her” as though mayor Parker was in charge. First off, Parker didn’t serve as mayor in 2008, she started in 2010 so she didn’t send anyone to do anything, nor to prevent anyone from fixing anything. If you checked with those fixing the power infrastructure, you’d have found that staging areas are not always closest to where the earliest repairs are made, they are selected for a host of reasons and not by city government for the most part. So my comment stands, if you have some valid reason to believe local government authorities did something to punish your conservative beliefs, I’d like to know as would most regulars here.
You can emphasize the word “opinion” as you see fit too but my opinion that the Houston is still growing is based on the US Census, a much more reliable source than an anecdotal counting of cop cars in a suburban neighborhood. I’m not sure how that translates into people leaving the city in droves and I’m not arguing Houston’s continued population growth is as much as the unincorporated portions of the county or surrounding counties (as a percentage), only that Houston continues to grow. Until there is a continued net loss of population in the city, claims of Detroit-styled abandonment are pure speculation. Also supporting my contention is that home prices continue to rise in the city, any mass movement in people out of the city would result in major price drops that simply haven’t happened. That doesn’t mean city leaders are capable stewards of public monies, only that people are still moving into it on average, the fiction that you save money by moving another fallacy I’ve addressed previously.
One last thing, Houston does lean toward the left politically and it has for decades. The trend is now for Harris County to follow in those footsteps, county voters dismissing local GOP candidates in the last election just as they picked Clinton over Trump. HC voters haven’t elected a Republican Sheriff in years, many highly qualified GOP judges sent packing in favor of democrats after twenty years of rarely seeing a “d” next to a winning candidates name. Move further out if you want to remain in “R” territory but the city was lost long ago.
No. Just say “No Mas!” to more future debt obligations to pay for past bad decisions.
Let the Bankruptcy Court sort out the mess.
A lesson to citizens: Progressive Democrats have controlled Houston for over a Century, and look at the mess they were allowed to create.
The massive bond debt Mayors “Tootsie Whitmire,” “Bob Lanier,” “Out-of-Town Lee. P. Brown,” “Bill Safe-Clear White,” “Anise Illegal-to-feed-hungry Porker,” and now “Sly Turner” has left taxpayers to repay is shocking.
Let’s see what’s coming to town…
http://www.courant.com/news/connecticut/hc-news-moodys-hartford-warning-20171019-story.html
“Those fixed costs include pension contributions, benefits, insurance and debt payments.”
“Contractual salary increases and employee benefits are significant contributors to the city’s long term structural imbalance,”
Note the effort to float 30 year bonds and the prediction current bond holders will see about a 65{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} ‘return’ on their investment. They have about a month or so to watch the wall approach.
Questions?
Did the COH previously issue POB’s under the White & Parker years in the amount of roughly $600 million?
Which retirement funds received proceeds from the sale of those POB’s?
Was some type of pension reform (reduced benefits,increase of employee contributions,etc.) adopted along with said funds receiving POB proceeds?
Did the infusion of POB monies along with pension reform help in the “health” of said funds?