By Bill Frazer and Craig Mason
“No one can deny that that $8.2 billion unfunded liability has almost been cut in half.” Sylvester Turner, at his Saturday, March 30th campaign kickoff.
It’s not only deniable, it’s simply not true.
In reviewing Houston’s published financial reports, the City’s unfunded pension liability actually peaked at $6.1 billion in 2016, the year before “The Fix” and stood at $4.0 billion in 2018. Although that would appear be an impressive reduction, those numbers don’t include an additional $1.0 billion of pension liability created by the voter approved pension obligation bonds issued in December 2017. They also don’t include $600 million of pension obligation bond liability issued in prior years without voter approval.
The actual “unfunded” pension liability stands at $5.6 billion, nowhere near the reduction that Mayor Turner would like you to believe.
Mayor Turner will never tell you that in 2016, before The Fix, The City’s total annual pension expense stood at $878 million. In 2018, the full year after The Fix, reported total pension expenses skyrocketed to $948 million. But that’s before adding in approximately $30 million of interest expense on the new $1 billion of pension bonds. If you add interest on the new bonds, total pension expense climbs to $978 million, an increase of 11.3% in just 2 years.
We think it’s wrong for the Mayor to make up numbers that grossly overstate the impact of his so called “landmark” pension reform. We think it’s wrong for the Mayor to mislead the taxpayers into believing that Houston’s pension systems are improving when, in fact, they are not. We think it’s wrong for the Mayor to mislead city employees and current pensioners into believing their pensions are getting safer when they are not.
We think it’s time for new leadership at Houston’s City Hall. We need a Mayor who will be honest with taxpayers and City employees about the health of the City’s pension systems and the true burdens they have on overall city finances.
Bill Frazer is a Houston resident, CPA and former candidate for Houston City Controller. Craig Mason is a retired actuary and former Chief Pension Executive for the City of Houston.
What’s really wrong is majority of the states elected officials believed him…and put a hand up to Firefighters who tried to sho different…..
Does any of the $5.6 billion include any post retirement health care benefits?
No. In the 2018 CAFR, Controller Chris Brown Reported:
“The city’s current unfunded OPEB liability sits at $2.438 billion as compared to $1.833 billion in last year’s
CAFR. This growth in unfunded liability has resulted in a $606 million decrease in the city’s statement of net
position, which is $791 million as of this report.
It has been the City’s practice to fund the cost of OPEBs on an annual pay-as-you-go (PAYGO) basis and account
for OPEB costs as a current operating expense in the fiscal year in which the OPEB cost is paid. This practice
satisfies the obligation to the debt but does not structurally reduce the accrued liability. Based on the five yearaverage,
the city is adding more than $160 million to the unfunded liability per year. In addition to making only
minimum payments – the PAYGO amount – on the debt, it’s clear that the approach to addressing the unfunded
liability is unsustainable.
The administration has indicated that it has begun examining this issue and will look to present a solution that
will address the OPEB liability in calendar year 2019.”
Thanks. Does any of the $5.6 billion include the increase in costs to provide spousal benefits to same sex couples as Kim Ogg, Anise Parker and Sylvester Turner have now baked into the pension plans?