If you recall, I asked, no, that’s not right, I begged the Houston Chronicle’s newest hire, Ericia Grieder, to take a look at the issue and render a verdict. I did that because I knew from past experience that she is (a) an expert on economic issues, (b) she is new to the city and the issue and (c) she really doesn’t care if you are a liberal or a conservative, she’ll call the balls and strikes as she sees them (heh, I had to get a baseball reference in there, right?). I even committed to purchasing a subscription to the Chron if she would write about it. She did and I did. Here is part of what she had to say:
Everyone agrees that Houston needs pension reform. The city has three public pension funds, for police, firefighters, and municipal employees. They are, as it stands, only 55 percent funded. The unfunded liabilities work out to $15.7 billion. The city’s share of that would be up to $8.2 billion, depending on how shrewd the fund’s managers might be.
Sylvester Turner campaigned on the issue while running for mayor in 2015, and the pension obligation bonds are part of the plan he proposed this year and pursued in the 85th Legislature. The result, after extensive negotiations, was Senate Bill 2190, authored by state Sen. Joan Huffman, R-Houston. Its terms call for city employees to contribute more to their pension funds and accept $1.8 billion in benefit cuts in exchange for an infusion of cash via the pension obligation bonds. It also limits the risk of future cost increases, through a financial corridor provision that caps the city’s contribution rates.
The deal itself is not perfect, for a variety of reasons, and conservatives may see it as a Band-Aid, because city employees would still be enrolled in defined-benefits plans. Fiscal conservatives are wary of that approach, in general, because if the benefits are defined, the costs of the plan itself are necessarily indeterminate. They can easily be higher than expected, and often are.
All of this raises some reasonable questions about the city leaders urging voters to approve the pension obligation bonds, as it might if someone asked you for a loan so they can pay off their credit card. Another loan, that is; Houston already has about $600 million in outstanding pension obligation debt.
“Issuing the bonds eternalizes a failed pension system,” argues Bill Frazer, who ran for city controller in 2015.
I can see where he’s coming from.
Still, I disagree with his conclusion. A billion dollars is a lot of money, but Houston voters are already on the hook for more than that. And passage of Proposition A would help lessen the burden, in addition to its sting. Interest rates are low. Houston’s municipal debt has a decent credit rating. The deal, as mentioned, includes significant benefit cuts – which can be rescinded, if the city doesn’t come through with the pension obligation bonds.
In my view, the passage of Proposition A would be a good thing for Houston. The measure is reasonable in itself, and it’s only one part of the pension reform deal – a deal which may not be perfect, but is already done.
A couple of things that she writes stand out to me. First, as I told you, she will listen to all sides (if you click on the link to the full article, you’ll see more of that). Second, she doesn’t hyperventilate over it, she simply states her opinion after reviewing it. And lastly, she distills it down to the essence of the issue: is it good for the city?
Clearly the issuance of these bonds (substituting high cost debt for low cost debt and future concessions from employee unions) is a net positive for the city. No serious observer can make a case against that basic premise.
Most of the opposition is based upon the fact that the City of Houston has been controlled by liberal Democrats for many years. Something along the lines of ‘you get what you ask for’. And that is completely true. But finally, after years of neglect, conservative Republicans have stepped in and come up with a plan that, while certainly not perfect and certainly not all encompassing, is good for the city’s future. Which means that it is good for the taxpayers in the city.
Hopefully the voters will agree with conservative Republican State Rep. Jim Murphy and vote for Prop A.
I heard that ad today on the Charlie Pallilo sports talk show on 94.1 FM in Houston. Talk about a micro targeted ad! Whomever is running that campaign is seriously good at recognizing who votes and who doesn’t. If you even know that Pallilo is back on the air and you tune in to a small FM station to listen to his highly analytical sports commentary, there is a high probability that you are a voter. In fact, as a political nerd, I’d guess it was close to 100%.
I was thrilled because some of us have been advocating for years that Harris County Republicans should spread their wings beyond conservative political talk radio. As best as I can remember, Harris County Judge Ed Emmett is the only Republican to recognize this, appearing multiple times on sports talk radio. Listening to Rep. Murphy’s ad and knowing that Republicans can indeed adapt to the politics of a purple county is very heartening.
Hopefully, Republicans will cast aside their inclination to oppose anything that Democrats propose, look at the facts at hand and vote FOR Prop A.
It really is good for the city.