Hats off to Houston City Council Members Michael Kubosh, Chief Bradford, Dave Martin, and Brenda Stardig for calling a special council meeting. This was an extraordinary move to attempt to answer an extraordinary problem – pension liability. Stardig of course thought the Firefighters were not getting enough.
Currently, the total unfunded debt for pension and health care benefits is approximately 5.3 BILLION DOLLARS. Houston’s total debt is 17.5 (depending on the numbers used) billion dollars, including other short term and bond debt. These facts demonstrate striking similarities between Houston, Detroit, and Chicago, even if the Houston Municipal Employees Pension System claims otherwise.
Let me try and put this in perspective. If property taxes were increased by fifty percent, it would take eleven years to pay off the unfunded pension liability, assuming they remain static. A twenty-five percent increase in taxes would result in a twenty year payoff. This does not include the short term and long term bond debt obligations.
For many years, city politicians have over-promised benefits to the police, fire, and municipal unions. One obvious reason for these poor business decisions: union endorsements. Politicians use your money to make union deals for these endorsements at election time. Here is an example of how the HPOU treats any politician that doesn’t toe the line:
The protection of police, fire, and municipal unions is not limited to the city. These unions enjoy protection from state officials through both endorsements and campaign contributions. In return, the bloated benefit packages promised to union members are protected by our state leaders and cannot be changed by the City of Houston. Make no mistake, Houston elected officials are okay with this arrangement because it allows the local officials to promise outrageous benefit packages and blame shift to Austin. This scheme works until the “money” guys, bond lawyers, cut off the borrowing.
The most glaring effect of this drunk borrowing scheme can be seen on our streets – a slow and steady deterioration of city roads and other assets. No money is available to repair and maintain our streets, buildings, and other COH infrastructure because of the reckless spending on pension benefits.
There is plenty of blame to go around but the fault lies with our local leaders, both past and present. At the hearing, Brenda Stardig said that firefighters deserve increased compensation. I believe that police and fire deserve fair compensation; but, they should not be permitted to bankrupt the city. Political officials have long curried favor with the unions and we are now seeing the results.
Every week, Houston City Council spends about 100 million dollars. The handout line is long and the people seeking these handouts are aware of the problem but continue to increase their requests. It is like the city is living in a twenty million dollar mansion when they should be living in the hood.
Houstonians deserve honest answers to simple questions instead of backroom deals that further increase the city’s debt. As a primer, watch the interesting discussion led by Senator Paul Bettencourt and others concerning the pension problem in the public comment period of the meeting. You can also listen to my comments (see item three under the public discussion) – I speak at 57:30 of the public comment section. I encourage anyone who cares about the pension problem to listen to the entire special meeting.
I have been ringing this bell for several years, glad to see it making news. I think the funds that are available should be given to the people they were meant to go to. Let them manage it and get the the citizens free from any further involvement in the pensions and post retirement health care funds. All we ever did was pay the taxes we were asked to pay. We did have a seat at the table that made the promises or directed the funding to be pais by future taz payers.
Hold the people that sis make the decisions accountable and that has to include the employees that insisted their union negotiators produce this fiasco and it has to include the three mayors that allowed it to happen. Obama signed the cromnibus funding package that included a provision to dissolve under funded pensions and distribute the assets. The police and fire funds don’t qualify but the municipal plan does. Eliminate it.
Math is the tool to use to determine who gets what. Move to a savings matching program. Or don’t and we move out…
Interesting, thanks!
oops, we did NOT have a seat at the table
The City’s finances are a ticking time bomb which will eventually explode. Worst of all, it is so avoidable. Although the firefighters can be put in dangerous situations completing their duties, and I thank them for this, it is obvious they are over compensated. Look at their turnover rate after removing retirements. It pales in comparison to the private sector. I could live with over compensating them if we were funding the costs fully, but to pass this debt on to our children is immoral.
We must elect a Mayor who will fix the problem!
Over compensated? I invite you to come do my job and put in the hours away from my family that I do. I’d like to see your opinion then whether you are over compensated when payday comes. Almost every firefighter I know has to work at least one other job to earn a decent living, in addition to risking their lives on the days they are at the station. We gave up raises and benefits in the past in exchange for promise of secure retirements down the road. Now we are down the road and the city doesn’t want to deliver what was promised. I’m sick of people like you that want to punish the only pension system in remaining that has taken care of itself and remained actuarilly sound. The fire dept used less deck time, pays out less in workers chimp claims and disabilities than any other dept in the city despite having one if the most physically demanding jobs. We save the city Millions every year. You should put a sign out in your yard proclaiming your desire to do away with ff pensions, then hope your house doesnt catch fire.
I should slow down and spell check. That’s sick time, workers comp claims.
I’m not advocating ripping anybody off of their retirement monies but I would think 92, 85 and 63 cents on the dollar is better than what will happen by putting off any action. The damage is done by not putting in the funds and losing out on the compounding but the people that are the most impacted by that decision are also the people that voted in lockstep to maintain the status quo.
Look at the firefighter’s approval of allowing Parker to raid their payments for three years. They know the mayor agreed to 8.5{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} growth on that borrowed money. No skin off their backs but a huge imposition on tax payers. That Sylvester Turner endorses it is all you need to know about his future performance as mayor. More of the same.
The fire dept budget including pension liabilities constitutes less than 1 percent of the city budget. Anyone who thinks that we are the problem is mistaken. The time has come to pay what was promised and the city wants to make a new deal.
That 1{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} claim is wrong. The Fire department is 20{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} of the general fund budget, $506 million out of $2.4 billion. http://www.houstontx.gov/budget/15budadopt/vol_1.pdf page 69
I know the fire department is over compensated by the fact you stay. Travis, if my house caught fire you would send half the fire department. The amount of structure fires we actually have demands it.
Have confidence in yourself you can do something different. Don’t think for a second there is a line a mile long to replace you. I guess you also know there is a half mile long line to replace you with volunteer firefighters that we don’t have to pay at all.
Travis, rest assured that I have paid you many times over to respond to a fire that has never happened.
More importantly, I am part of that group that likes the Detroit cram down scenario. You have no concept of the fact we can’t pay the pension debt now. I can drill oil wells from the South of France, I am betting there is a union that says you can’t put out fires there, see how that works:-)
Don Hooper, are you kidding me?! Apparently your silver spoon lifestyle is too good to actually go and speak to the members that you are so disrespecting. I promise you if you would spend a day actually talking to the men and women in HFD your perspective may change!
As far as your comments about being replaceable and no long lines to join the ranks and volunteers doing our job; I have this to say:
Look at the number of applicants and people who take the civil service exam, go to your rural outline depts and ask if they had an ultimate choice where would they want to be and I promise you the majority will say HFD!
Why, because HFD has the highest reputation of being professionals and being a very aggressive dept when it comes to fighting fires and saving lives! Oh and yes our benefits. I honestly beg you to come tell my child who I raise by myself having 100{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} sole custody of being a single parent that “you know what kid, your daddy makes too much money!” And to hear what he would say, knowing his daddy works 3 jobs at times to give him a lifestyle nowhere even close to yours!
Now let’s discuss your ridiculous comments about volunteers! You live in fantasy land to think volunteers would just walk up and say “yeah let me do what y’all do for free”. They volunteer at the small outline rural communities for a reason. Most just want to fight fires. We have members in our agency that are the same way; however, we don’t get to just fight fires! Those volunteers you speak of never have to be in charge on a ambulance that makes 15-20 calls a day and that the majority of those calls could be taken care of by common sense. They don’t have to go to the worst parts of town knowing some people there hate them but still provide the best customer service possible and actually make a difference in someone’s life.
They volunteer because they get to be called firefighters and don’t have to put in the work that us professionals do.
I’m done ranting; but, I highly encourage you to stop passing judgement on men and women that are responsible for being there in your time of need and actually go sit and hell take a few rides and have your eyes opened to a subject that you are completely ignorant about.
Art,
You sure show a lot of disrespect for those that pay the bills. I have told many of firefighter they are way over compensated. And, yes everyone wants to work for HFD because of the benefit package is 50{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} more than everyone else in the state of Texas.
Also, no one from the HFD or any fire department has ever saved a life. Art, no one lives forever. You need to tell your child don’t go work for the HFD because there is no benefit package available because the union broke the bank before you got there. You need to find a job that will take care of me in my retirement because I am about to lose my retirement in a cram-down through bankruptcy.
Mathematically, you can explain it to your child this way because you clearly don’t understand, so tell them this. Honey, even if we raised taxes 50{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} we couldn’t pay off the piled up debt. However, let’s say we did, all the poor folks would be forced out of their homes and only the rich would be left. Well guess what the rich will move faster, because they can. What is left is Detroit. Look around dear sweet child because we can’t even repair the roads now. Dad made a poor decision to be a firefighter in Houston, you don’t need to repeat the mistake. The moral of the story is hogs get slaughtered, pigs get eaten.
Stay in school and get a good education because you will need a lot of money to take care of dear old dad in retirement, do good in math, it was not my strong suit.
See Art with the silver spoon came a first class education.
I hope this helps.
The firefighter pension accounts for less than 10{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} of that 5 billion dollar pension liability. That is because it is well run, and being under the state legislature has required the city to fully fund it, unlike the police and municipal pensions,
Firefighting is a profession that takes many years to get good at. Competence requires career-long learning, which includes the EMS part of the job as well as actual firefighting, One reason why a pension is a good method of compensation for fire (and police) is that by its nature it encourages employees to stay for their whole career. Veterans passing their knowledge on to newer firefighters is an essential part of learning the job, and much of that knowledge is unique to each local area’s buildings, target hazards and population. Having a turnover rate comparable to most private businesses would be detrimental to the department’s quality of service.
If the city replaced pensions with a 401k, that line to get in would get a lot shorter. And the people that would still be in the line would average a lot lower quality. Yes there are some people who just want to be a firefighter no matter what, and some who would even volunteer. The majority of people, though, do consider retirement security as a major part of the compensation. Despite the relatively small paycheck, the fire department is populated with many very smart people who could have chosen other, higher paying careers and been successful at them. These are people who are leaders in their stations and department-wide , often who promote to officer positions and are both career long students and teachers. These are the type of people you would tend to lose if you tried to make the fire department more like a private sector job.
Jonathan,
Everyone is very replaceable, most like to think they are not. Sounds like your beef maybe with the Police union.
Here is a tip for all three unions. This type of BS rhetoric. Is exactly what was said in Detroit when the Unions were forced to except cents on the dollar for their retirement packages, keep it up.
Thanks for the thoughtful reply.
So there have been so interesting numbers put out there but not all are accurate. So let me begin with the FD budget issue that was thrown out there. The correct number that was supposed to have been stated is that the HFD pension unfunded liability is less than 1{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} of the total budget for the city of Houston. I want to say the last number I saw was around 300 million. However, the myth of “unfunded liabilities” is complete BS. First off, the firefighter pension is around 91{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} funded. The magical number used by most agencies out there to discuss pension funding is that above 80{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} is “excellent funding and highly rated.” So the firefighter’s pension is rated as one of the best out there. I think it is in the top 10 in the nation actually. Both firefighters and city put money into it, where as some cities it is only the city that funds it.
The unfunded liability phrase is most often directed at the other two pensions, which have meet and confer with the city. That boils down to the members of both unions accepting incentives for letting the city put less money into the pension now, with the agreement that in the future it will be paid back. However, when that future comes, all of a sudden…the city cant afford to pay it back. Imagine that. A pension is not designed to be paid out ALL at once. People working now are paying for the ones who retired(by them putting money into it) and the future workers are paying for your retirement. By not putting money into the pension, the city itself is creating this issue. Going to a 401k does NOT solve the issue. Employees on a pension do NOT pay social security and neither does the city. By switching to a 401k, the city would have to pay into both the 401k and social security. I want to say that is close to a 17{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} figure.
The firefighters pension is the most highly funded and have twice cut the city’s contribution rates but that is never accredited to them.
But back to unfunded liabilities. Since a pension isn’t designed to be paid out at once, it is paid out over time. Unfunded liabilities are a issue but it is one that normally does not require a quick, drastic fix. However, most American’s HAVE a major unfunded liability and no one is screaming about it. It is called a mortgage. I have one, as do most home owners. And mine right now would classify as over 50{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}. I’m not up in arms over it, neither are most. Why? Because it is NOT designed to be paid out at once. It is paid out over time….. Just like the pension’s.
If the unfunded liability is $300 million, then the 1{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} claim is still wrong. $300 million is about 12.5{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} of the $2.4 billion general fund budget that includes public safety.
COH 2014 budget was 4.9 billion dollars.
So i was a lil off on first {997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}
And now….my favorite part. When Detroit is brought into the issue. Who ever compares the City of Detroit to the City of Houston is just trying to use a scare tactic.. There is hardly any relation between the two.
Detriot property value dropped 67{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986} while it had the highest income tax and property Tax in the state. Revenue was almost double in 1960 than in 2012(in modern dollars) while the number of city employee’s far outceeded what they had when the population was close to 2 million. What people fail to remember is that in the mid 90’s up until 2000, detroit was SOLID financially. Revenue was higher than debit and even Wall Street put Detroit on solid ground. It was the mayor’s that took over after 2000 that DROVE detroit into the ground and killed the motor city. From 2000 to 2012, the value of property tax income fell 55{997ab4c1e65fa660c64e6dfea23d436a73c89d6254ad3ae72f887cf583448986}. Pension liability for them was around 5.4 billion according to the last article I saw. So the 5.3 billion dollar’s that was listed in this article is for a city of around 2.4 million people…while Detroit was a city of around 700,000. Not really close in those terms.
Combining the factors that we have excellent property value(too high for most people to live in decent areas of the city nowdays), excellent economy with the largest medical center in the world, largest port in the nation etc etc and are continuing to grow…. Houston is nothing like Detroit, who has been a failing city for the last two decades.
What IS the issue is frivolous wasting and spending of money, which was also a issue in Detroit. The TIRZ funds, that have amount to almost a BILLION dollars so far…what has been done with it? A city that is continuing to grow but has tax revenue capped? Wasting tax payer money, such as the red light camera issue and countless other issues.
Pensions are not the issue.
HR,
So what you are saying is that the Fire Department pension is fine and it is just a mortgage? Great, let’s half halve the pension contribution to the fire department and fix the roads and shore up the police pension, after all the police have a real dangerous job. I am down with that and the fact that the price of oil is half of what it was 6 months ago is no concern. Cool. Done
It is just a mortgage, we can pay it back later.
That is exactly the thinking that has gotten the city into the trouble it is currently in with the 2 pensions it owes…. pay back later but when it comes time to, it never does.
You want to fix the roads? Easy….that is what the TIRZ money is good for. But of course…rather than use it for that, we need to grease palms and attract corporations with tax breaks that never work out for the city
Oh, I thought it was over paying labor unions that got us into trouble. You’re saying its tax breaks to corporations and the TIRZ’s causing the financial problems.
Maybe all the companies should relocate out of the COH and redirect all the TIRZ money to the responsible city government is your plan?
All volunteer fire department here we come.
The really funny thing is the wasteful government spending is not limited to unions. The unions are not the only ones who can talk not very smart political officials out of money. The union folks like people to say yes to things they can’t afford, the problem is they say yes to everything. I often tell folks voting is easy, if someone is endorsed by a union, you know who not to vote for.
Btw, TIRZ money can be only spent within the TIRZ. And, yes the same polticians who said yes to the unions said yes to the TIRZs, see how it works;-)
over paying the labor unions and the people that work for them? Yeah… I can see math isn’t your best subject, since the people that work for the city are underpaid compared to other cities in Texas. Even ones with similar retirements, like Austin.
Oh and TIRZ money is supposed to be spent on the areas that generate it? Hmmm… Then why are the streets so bad in River Oaks? Why is Greenspoint called Gunspoint? With a city that is continuing to grow the way Houston is, due to the excellent economy and not due to affordable housing prices(any look into prices will reveal that housing costs in Houston have outpaced Dallas, Fort Worth, San Antonio and even Austin) there is no reason to have a revenue cap that limits intake. Hell, with the rising housing costs, one would only assume that the city should pay its workers more to offset that. But no doesn’t always work that way.
Funny thing is…. I got this from an article off the Chronicle regarding the TIRZ:
“When first conceived by legislators in Austin, TIRZs were supposed to target specific improvement projects and end once the project was finished. Now they’ve taken on lives of their own, expanding their borders, adding years to their lives and sucking up taxpayer dollars at a time of debt obligations and pension problems. City Hall needs to take back the reins of government and use them to firmly tie the hands of each TIRZ, dragging their secretive meetings into the daylight.”
The two pension plans that are controlled by the city are the ones that are the worst off financially… isn’t that something. You put the local government in charge of something and they bankrupt it and then complain about it being bankrupt.
It’s amazing how my reply doesnt show up.
Touche one sided arguements