Looming Pension Problems in Houston

Although some Houstonians were relieved after the last budget cycle that the city seemed to bounce back, it looks like the new budget shortfall will be worse than ever – perhaps $47 million (although with increasing sales taxes and property tax revenue, it might be slightly less).

Mayor Annise Parker has done about as much as she can do when it comes to making cuts across the board.  It is now time to dig deeper and find real places to cut and evaluate every penny in each department.  Doing so will surely find many areas to cut, do away with, and maybe even places where money has been lacking.  We just don’t know until we do a thorough analysis.

With that being said, there are problems looming around the corner that need to be addressed.  Public safety accounts for roughly 60% of the budget.  That probably will never be cut, and I’m not advocating for that.  Public safety, in my opinion, should be the number one priority of the city government.  So with the exception of probably much needed reevaluation and reallocation of the public safety budget, it’s not going anywhere and for a good reason.  

This leads to the next problem.  If public safety accounts for 60% of the budget, that means that we only have 40% of the budget to do EVERYTHING else.  This includes the huge, looming fiasco called the city pension.  Houston’s pension is broken up into three areas: Police, Fire, and all other municipal employees.  Year after year, the city does not put as much money into the pensions as they are supposed to because they don’t have the money.  If this is the case, clearly some changes need to be made to the system as a whole.

Politicians don’t usually like touching the pensions because it is such a heated topic among just about everyone, and both political parties have strong opinions and even differ within the party on how to solve the problem.  Right now the pension issue is just an agitation that manages to get stifled each budget cycle.  Until it becomes a real dilemma, getting anyone to try to solve the problem will be difficult to say the least.

Parker has attempted to start looking into it and making changes, but she still has a very long way to go.  State law mandates defined-benefit plans as well as many other requirements.  Although the city usually has autonomy on many cases, this is one where Parker is going to have to work with the state to have more leeway because this system will become unsupportable very quickly.

One solution that needs serious consideration is completely changing the system for all NEW employees.  To be very clear, anyone who is a current employee or retiree should get exactly what they were promised.  To guarantee something and then take it away is unquestionably dishonest.  While there are surely changes that can be made to the current plan, anything promised needs to remain.  However, anyone new coming in to the system needs a completely different plan that is comparable to the private sector.  Otherwise we are just being dishonest with the next generation.  We can’t continue to make promises we know we can’t keep.

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