Sylvester Turner, the Mayor of Houston, unveiled his preliminary plan for pension reform on September 14. The plan comes after 15 years of progressively increasing expenses and seven months of tough negotiations. According to the mayor, the new plan will be in effect for 30 years and is expected to pay off the calculated $7.7 billion debt. The city owes this amount of money as its pension fund. The plan states that Houston will pay off the money over a 30 year span. The list of measures include cutting annual expenses and making fill annual contributions to municipal, police and fire pensions. The mayor described it as to be done in cost-neutral fashion.
Mayor Turner said that all three of Houston's pensions have identified the number of benefit changes to slash the unfunded liability. About $2.5 billion will be saved by this action. These savings, he added, will be possible even without the raising of taxes imposed on the residents of the city. Houston will also issue pension obligation funds to the tune of $ billion. It will also lower anticipated rate of return applicable on pension investments- from the present 8.5 percent to safer seven percent. This increased the unfunded liability figure from the previous $5.6 billion to $7.7 billion estimate.
According to Mayor Turner, the pension board of firefighters has consented to all terms barring a proposed financial cap. The elected official compared the cap to a thermostat which must be kept at set temperature. In case market conditions in the future cause expenses to break the set limit, the pension boards along with the city will work in tandem to bring expenses back inside the cap.
David Keller, Chairman, Houston Firefighters Relief and Retirement Fund, brought out a statement post news conference. He said that while his group works with the city, there was not yet an agreement on all the adjustments made to the current plan of the fund. He said that a number of economic changes were discussed. These changes would fit within guidelines that are set by the mayor. Although the important issues are presented to them, no resolutions were made.
Many disagree to this scheme of things. Bill King, a veteran of pension reform advocacy, said that the total unfunded liability of the city is approximately around $8.3 million due to previous pension debts of $6oo million. If one goes by his words, the numbers do not add up.