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May
14, 2007, 12:36PM
City
can’t keep pension fund promise
Citing
strained resources, mayor would let workers contribute less, get fewer benefits
By
MATT STILES
copyright
2007 Houston chronicle
Short
of layoffs, the city won’t meet its full obligation to the municipal pension
fund in the next fiscal year, Mayor Bill White says, citing rising public
safety and health care costs that are expected to strain resources.
In the next budget, expected to be unveiled Wednesday, White’s administration
will propose paying only two- thirds of the statutorily required pension
contribution —
an
arrangement that still would need approval from a skeptical pension fund board.
The employee retirement plan continues to be a challenge for White, who
inherited a $1.9 billion unfunded liability in the pension fund when he took
office in 2004.
His administration managed to cut that liability through a series of moves that
included raising employee contributions and cutting future benefits.
White hopes to reduce the liability further by proposing
a hybrid approach that would allow employees to opt
out of contributing a portion of their pay in exchange
for
a reduced retirement benefit.
“The big question is —
and
this needs to be hammered out — how do you get from where you are now to this new
structure?” said Craig Mason, the cityTs point man on
pension policy and planning.
RESOURCES
Where the money’s going
Houston
Mayor Bill White said the decision to underpay the pension fund is prompted by
competing priorities, including:
• Police: Funding six police academy classes, adding a few hundred new
officers to offset retirements, and paying for an additional $45 million in
overtime in the meantime.
• Firefighters: A $21 million increase to fund contractual pay increases
from a collective-bargaining agreement.
• Health insurance: As much as a 20 percent increase in civilian
employees’ health insurance costs in the next two years.
NewsWatch: City Hall: Chronicle reporter Matt Stile
discusses local issues
He
said the city could apply the hybrid idea to new employees, which would have a
slower impact, or try to make it apply to everyone. Both ideas would require
approval from the council and the fund’s board, a prospect that could prove
difficult.
White said the decision to underpay the pension fund is prompted by competing
priorities, including:
•Funding six police academy classes, adding a few hundred officers to the
understaffed force to offset retirements, and paying for an additional $45
million in overtime to boost operations in the meantime.
•A $21 million increase for the Houston Fire Department to fund contractual pay
increases from a collective-bargaining agreement.
http://www.chron.com/disp/story.mp1/head1ine/metro/48OO636 .html
5/14/2007
City of
•As much as
a 20 percent increase in civilian employees’ health insurance costs during the
next two years.
The city has prepared for some of these looming payments, White said, building
up tens of millions in an undesignated fund in recent years. But that is not
enough to meet the additional $39 million for the increased pension obligation.
That has sparked concern from David Long, the fundTs
executive director, who said the system needs full annual payments to remain
viable over time. He also said White’s move could upset morale among the 12,000
civilian city employees.
Three
options
White
said he canTt make the payment, which he agreed to in
2004, without firing some 400
civilian employees, borrowing or raising HoustoniansT
property tax rate. White has ruled out the
latter. He also wonTt propose a rate cut, as heTs accepted each year since 2004.
“Given the huge and understandable demand for more investment in public safety,
people on council are going to have to make a clear choice between the number
of officers and the tax rate,T’ he said. TIJ believe most
citizens will want some more police officers.”
Precise figures in the budget aren’t yet public, with officials adjusting
amounts for various departments last week. But White said the general
operations portion of the budget, funded largely by property and sales taxes, would increase less than 4 percent.
To accomplish that, White said his administration has learned to do more with
less, relying on federal grants and cutting costs though efficiencies. His
administration also has raised or added some fees across the city to keep up
with inflation, drawing the ire of some conservatives who call such increases
“hidden taxes.”
Several departments, including solid waste, housing and municipal courts
administration, were given budget targets that would cut their spending from
the previous fiscal year. But White said Houstonians shouldnTt
expect fewer services, such as shorter library hours or reduced park
maintenance.
Public hearings on each department’s spending begin May 29. City Council has
until June 30, when the fiscal year ends, to amend and approve the plan.
‘Underfunding’ is a trend
The council
generally has accepted White’s budget proposals with few substantive changes.
The municipal pension fundTs board, however, might be
less receptive to White’s plan to keep the contribution at its current level.
Facing the prospect of having to make huge annual contributions to comply with
state law, the city got the fund’s board to agree in 2004 to reduced payments
for the past three years. The contribution was to increase in this year’s
budget.
Douglas Benton, a vice president and senior credit officer with MoodyTs InvestorTs Service, said
the city has in recent years contributed “low” amounts to its municipal
pension.
TTThe trend in underfunding
of pensions is something weTve seen in other cities
across the country,” he said. “To say one concern or challenge would outweigh a
decision on the rating assignment would not be fair.”
In February, MoodyTs assigned
http://www.chron.com/disp/story.mpl/headline/metro/48OO636.html 5/14/2007
City of Houston can’t keep pension fund
promise Chron.com -
Houston Chronicle Page 3 of 6
Controller Annise Parker said she’s concerned the city hasn’t started
negotiations with the pension fund, but she said the statutorily required
contribution —
roughly
24 percent of payroll —
isn’t
supportable.
Long, who’s asked the mayor in writing for meetings but got no response, called
it “disappointing and frustrating.T’
“We’re hoping at some point that they will answer our letters, and he’ll
appoint somebody to sit down and have a discussion with us to try and figure
out what we can do to bridge this gap,T’ he said.
“Ultimately, we’re sort of coming to the end of the line here.”
matt.stiles@chron.com
VOICES OF
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POWERED
Guido
wrote:
Hey, Mayor White, we understand
Why concern yourself with lifelong Houston/USA residents who have lived up to
their end
— of the bargain?
After all, they’re not likely to vote for you in your next aspiration anyway,
or for your party again. Heck, you’ve got all those quasi-literate,
mono-lingual crimigrants, plus the Katrina roofie thugs on your side now! Just ‘dis
the rest. Just hope you move to D.C before your ‘new Houstonians” move into
YOUR neighborhood!
With all due respect,
5/14/2007 2:44:32 AM
Recommend (14) Report abuse
gergie wrote:
The best way to fix this would be to stop wasting money on political contributer contracts. The city of
— County. The money
they spend on one contract could be used to expand public works, who could do the work much more cheaply, expand the base of
employees contributing to the pension fund. It could be run efficiently, if it
would simply be run transparently.
The myth that private contracts are more efficient has not been born out by
history. Developing an efficient Public works will take some time and there
will be the danger of political rewards and payoffs. But that is happening now
in the private sector. .with the added political distance it affords when
something goes wrong.
Look at the money Perry has wasted on Accenture. He has spent more than double
what it would have cost government to run, and will end up paying the
government to bail Accenture out of the mess they created.
Pointing to a few welfare queens is the trick that politicians use to justify
these political pay off private contracts. It’s a scam folks. Wake up. The real
queens are the contractors getting rich off our tax dollars and delivering substanard work at inflated prices.
Aren’t you glad that we deregulated energy? It’s so much more efficient and
saves us
http://www.chron.com/disp/story.mpl/headline/metro/48OO636.html
5/14/2007
City of
bundles.
They made a show of Enron, but we’re still getting screwed.
I’m not saying all private contracts are bad, but most are about paying someone
with great connections or minority status(another
scam). Most government employees I have met actually try very hard to be
efficient and enforce quality.. .its
the politics that screws it up.
5/14/2007 3:51:42 AM
Recommend (5) Report abuse
Festus wrote:
Re: ‘The money they spend on one contract could be used to expand public works,
who could do the work much more cheaply”
One problem with expanding Public Works. How many engineers from the private
sector are anxious to go to work for the city of
5/14/2007 4:10:38 AM
Recommend (1) Report abuse
tony77Ol9 wrote:
We have millions of dollars to harrass adult
businesses who contribute to the tax base in ________
White -
you
stink.
5/14/2007 4:40:28 AM
Recommend (11) Report abuse
Krumley wrote:
Before you all condemn the mayor, remember that he
inherited this mess from Lee
Brown- who, by the way, left this city in one of the biggest financial pig pens
it had ever experienced. Tony, if you recall White, maybe we can get “Out of
Town Brown” back to “fix” everything once again (when he’s not on junkets to
Europe & Africa to “enhance relations” with our “sister cities’, that is).
5/14/2007 5:46:21 AM
Recommend (9) Report abuse
tmlewis wrote:
This proposal involves nothing more or nothing less than cooking the books. Must have been reading Enron’s playbook.
The pension liability accrues regardless of whether there is an
credit entry.
The major rating agencies have already indicated that this move would damage
the City’s credit rating. So, go right ahead and trash the community’s credit. Somewhat similar to an individual making late payments on a credit
card.
5/14/2007 5:53:45 AM
Recommend (1) Report abuse
billywitt wrote:
To paraphrase Lance Berkman when Roger Clemens signed
with the Yankees, “If you’re - surprised by this then you’re either uninformed or a
moron.” Defaulting on pension funds
is reaching epidemic proportions. Private companies started this trend several
years ago when the steel industry in
http://www.chron.com/disp/story.mpl/headline/metro/48OO636.html
5/14/2007
City of
before this
pension funding problem reached the municipal level. Soon it will reach the
state and federal levels as well. The solution to this is for workers to
establish retirement accounts like 401k so that in the future they can control
their own destiny instead of relying on their previous employer or Uncle Sam.
But then what of the current retirees? I wish I knew. They cant
be left out in the cold, but we cant go bankrupt either in order to provide
them with health care. This situation is a harbinger for things to come when
Social Security finally collapses in upon itself. The economic model of
retirement in this country was built on having our children foot the bill.
Unfortunately for us, we’re the generation that has to pay the check.
5/14/2007 6:48:16 AM
Recommend (4) Report
abuse
thingamabob
wrote:
Way to go Tony77019! Maybe not the recall, but, yeah, there seems to be plenty
of ‘
money to get this SOB
problem going!! Hmmm, fight SOB’s or fund pensions,
while
losing tax base, that’s a tough one.
5/14/2007 7:07:44 AM
Recommend (4) Report
abuse
farm2006
wrote:
To screw a retiree is easy because you don’t see them. The city has the
money, they
— just love the
pork, and paying their friends with big companies.
5/14/2007 7:09:29 AM
Recommend (5) Report
abuse
Iewisl95O
wrote:
For 9 or 10 years the city has been getting a free ride with ever increasing
revenues due to rising property appraisals and the resulting increase in their
tax income. It should
— have been incumbunt on politicians to reduce the tax rate as
appraisals rose but they didn’t because who’s going to take a voluntary cut in
income, especially a greedy government hooked on ever increasing spending.
While inflation and pay raises hover around 2.5% to 3% annually the city,
county and school district incomes have been increasing more like 7% or 8%
annually yet they cant seem to control spending and keep their promises to
workers who accepted lower wages in exchange for a decent retirement package.
5/14/2007 7:30:51 AM
Recommend (11) Report
abuse
1
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