DALLAS – A bill allowing Houston to restructure its pension system has cleared its first hearing in the Texas Legislature, but Mayor Sylvester Turner called a provision requiring a public vote on $1 billion of pension obligation bonds a "poison pill."
The pension bonds are a key element in the city's agreement with its unions on a deal that reduces benefits along with the pensions' unfunded liability.
Officials with the police and municipal unions and pension boards told the Senate panel that they support Mayor Turner's proposal to rewrite the pension regulations, but not with a public vote on the bonds.
Turner, a former state legislator, said he hoped to have the bond vote requirement eliminated before Senate Bill 2190 comes up for its final vote. But Sen. Joan Huffman, R-Houston, who chairs the Senate State Affairs Committee and is carrying the bill, said the bond election would be necessary for passage.
"I stand behind you," Huffman told Turner at Monday's meeting of the State Affairs Committee. "There are plenty of folks who don't like this plan no matter what because they don't think it goes far enough, but I understand this will be good for the city of Houston. I'm going to do my best to get this bill passed. It's going to be kind of tough, but it needs to be done."
Sen. Paul Bettencourt, R-Houston, also supports the requirement for voter approval of the bonds.
Turner argues that the debt exists, whether in the form of pension obligations or as municipal bonds.
Fire Pension chairman David Keller testified that SB 2190 would "make unfair and disproportionate cuts to firefighters' benefits to cover the city's financial shortfalls." Huffman said that the intensity of the firefighters' opposition was cause for concern.
The bill would allow all three of Houston's pension systems to offer an alternative retirement plan, including a defined contribution plan, if both the municipality and pension system consider it appropriate.
Updates to the police and municipal pension plans in 2004 and 2007 have failed to keep up with costs, leading to $8 billion in unfunded obligations.
Under Turner's plan, lower investment return assumptions would be applied, with a goal of retiring the pension debt in 30 years. In the process, the city's annual costs would be reduced.
In the event the financial markets collapse, reducing investment returns, the city's future costs would be capped.
The city also agreed to issue $1 billion in POBs to catch up with funding requirements.
Leaders of the police and municipal unions and pension boards told the Senate panel that they support the proposal, but not with a public vote on the bonds.
