(Courtesy: Lauren Reid)
AUSTIN, Texas (FOX 26 / AP) - The Texas Senate has approved a bill potentially cutting billions in future costs from Houston's cash-strapped police and firefighter pension plans.
Republican Sen. Joan Huffman's proposal was approved Monday 23-5. She said it wasn't perfect but still "critical" to America's fourth largest city's future.
Plagued by investments that didn't meet high return expectations set previously, Houston is facing about $8 billion in unfunded pension liabilities. Mayor Sylvester Turner has warned of up to 2,200 layoffs.
Huffman's plan is similar to one backed by Turner. It provides $1 billion in payments from bond proceeds to be divided among the police and firefighter pensions, while lowering the plans' future investment yield targets.
The bill didn't include a conservative-backed effort to change both funds from guaranteed pension payments to 401(k)-style "defined contribution" plans.
If the House passes the Houston pension bill it will impact both veteran and recently hired city employees.
The Houston Police Union backs the plan and is pushing for it to become law. But the Houston Firefighters Relief and Retirement Fund calls it punitive to active and retired firefighters. The pension reform plan will impact not only city employees but every taxpayer.
“Less and less police officers and firefighters to respond to you when you pick up the phone and call 911,” said Houston Police Union President Ray Hunt. “So everybody in the city of Houston is affected.”
The big concern all along has been how does the city afford to give good retirement benefits without going broke.
Here’s how the plan would work. If pension funds do not hit specific targets like 65 percent, then new employees would switch over to a defined benefit plan.
“Obviously it’s not a happy day for anybody when we’re cutting benefits like we have to, but we also know these changes are absolutely necessary to have a sustainable pension,” said Hunt.
Under the plan current HPD officers and firefighters will make a 10.5 percent contribution into the pension system.
“So in essence those of us who are still here taking a 10.5 percent pay cut in order to make the system more sustainable for everybody,” Hunt said.
Under the plan, City of Houston retirees won’t get a cost of adjustment for at least two years and future adjustments will be based on how much interest the city’s retirement fund makes over the last five years.
There’s actually good news for city employees hired after 2004. Retirement benefits would begin when your age and years of service reach 70. Right now city employees must be at least 55 to retire. The benefit cuts, some believe, are an evil necessity.
“None of us want to be 80 years old and getting a letter stating we have no more money in the pension system,” said Hunt.
Before the Houston Pension Plan becomes law it must be passed by the House then it would be placed on a ballot for voters to decide.
The City of Houston Mayor's Office released the following statement on Monday:
Texas Lieutenant Governor Dan Patrick released the following statement on Monday:
Texas Senator Paul Bettencourt's office released the following statement on Monday: