Firefighters' fund files lawsuit against City of Houston

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The Houston Firefighters Relief and Retirement Fund released the following statement on Wednesday:

On Tuesday May 30, the Houston Firefighters Relief and Retirement Fund filed suit in Harris County District Court against the City of Houston seeking declaratory judgment challenging the constitutionality of provisions of recently passed Senate Bill 2190 that purport to legalize the City's underfunding of HFRRF.
The bill, which was crafted by the City of Houston, directs HFRRF to use particular fundamental financial assumptions.  HFRRF’s Board maintains in the suit that it has sole constitutional discretion over determining actuarial assumptions for the Fund moving forward.  

HFRRF filed suit because SB 2190 directs the pension fund as to some assumptions and takes away its sole discretion as to others. Use of some of these assumptions and processes must occur before the bill even takes effect on July 1, 2017. The City wanted these provisions so that it could reduce its contribution rate for firefighters’ pensions in its 2018 budget, which also is set to take effect on July 1.

In his testimony to the Senate State Affairs Committee on March 20 and the House Pensions Committee on March 27, the firefighters’ pension fund Board chairman David Keller advised that, based on the opinions of constitutional lawyers, these portions of the bills they were carrying for the City of Houston are unconstitutional.  Keller offered the following comments with regards to the lawsuit:

  • We filed suit because our Board is already being asked to knowingly violate its duty to the Texas Constitution through provisions contained in SB 2190.  We will not collude in an act we believe to be illegal based on sound legal analysis.
  • The City’s proposed budget allocates about half the amount it owes to firefighters’ pensions under the current statute. The City thereby would fail to adequately pay its share, in addition to the much greater amount of Fund endowment and member contributions that goes to fund the system. The City’s lesser amount will severely underfund the system, once the Texas Constitution is heeded.
  • We also filed this suit in recognition that the bill takes effect on July 1, 2017.  However, by its very terms, SB 2190 purports to require us to take actions even before this effective date.
  • We warned everyone from the beginning that SB 2190 is unconstitutional. And yet the headlong rush for a solution for a pension issue for which HFRRF was not part of the problem, as the best funded in the state among large systems, is causing yet more of a City problem as the City attempts to proceed on an unsound foundation. It did not have to come to this. HFRRF recommended fair benefit adjustments to the legislature, but leaving out the unconstitutional parts, which would have still been a very appreciable cost savings to the City.   The Mayor, however, positioned matters so that the only reform that the legislature could approve was the one designed by the Mayor.

The suit itself addresses conflicts between the newly passed SB 2190 and the clear dictates of the Texas Constitution. The 1975 constitutional amendment approved by statewide vote vests the pension board with exclusive authority to “administer the system or program of benefits.” The lawsuit states the “Texas Constitution vests in the Fund the sole authority and discretion to ‘select legal counsel and an actuary and adopt sound actuarial assumptions to be used by the system or program.’ Despite this clear constitutional directive, the Texas Legislature has passed Senate Bill 2190 (“SB 2190”) by a margin in each house sufficient for it to take effect on July 1, 2017.”

The lawsuit goes on to detail how SB 2190, in clear violation of the State Constitution, sets an assumed rate of return and purports to grant authority in part to the City and the City’s actuary to determine other actuarial assumptions, including future assumed rates of return. These determinations are central to pension fund management and belong solely to the HFRRF Board of Trustees.

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