Texas Senate passes bill overhauling Houston's troubled pension system. Brandon Formby, John Thornton's Tribune.
Houston is already facing a $90 to $100 million shortfall in its budget that has to be approved by the end of next month. In July, when Houston's 2018 fiscal year begins, the city will have to pay $130 million into the police retirement fund. If pension reform legislation goes through, the city plans to quickly issue its $1 billion in planned bonds to avoid draining $130 million from its general fund. If the city has to use its the general fund for that payment, it will create a $220 to $240 million budget shortfall that will lead to layoffs for city employees, including police officers and firefighters, according to Turner.
Houston Pension Reform Bill Passes Senate by wide margin. Mike Morris, HoustonChronicle
The legislation would require a referendum on the $1 billion in bonds Turner plans to inject into the under-funded police and municipal pensions, cash that also was used to bring those groups to the negotiating table for additional rounds of benefit cuts since Houston's pension crisis began in the early 2000s. If the referendum fails, the bill would reverse the groups' benefit cuts.
There are two important take-aways here that are being downplayed by the TLSPM.
First, this bill is not now, nor was it ever intended to be, a pension "fix". This bill allows for the City to take on $1 Billion of extra debt to pay obligations without draining the general fund to cover current and overdue liabilities. Since the overdue liabilities are, relatively, interest free, and the bonds will have interest, this is akin to refinancing your house with credit cards. It's a dumb move but it does provide the city of Houston a moment's pause without having to make any politically unpopular cuts.
Second, Turner's "pension fix" is actually the upcoming vote on lifting Houston's pillow-soft revenue cap. If that is successful then he can raise taxes during his "lame duck" 4-year term extensively to a point that his political patrons on the pension boards are made whole. For as much as Turner has tried to be seen as "adversarial" to the pensions, he really has them to thank for much of his political career.
So the entire enchilada is going to be rolled up in two future votes. One addressed in this bill (the $1 Billion in bonds) and one that's out there but only being paid lip-service for the time being. The city's hope is that the populace doesn't put two and two together, and that they're not paying close enough attention to realize what is going on. The media can't be relied upon to report it, in part because they don't understand what they're reporting on and in part because they don't have a problem with huge tax increases to fund the pensions of their institutional sources, people they like, spend a lot of time around and rely upon to get scoops.
Another problem is that the opposition to this, although correct in their arguments, doesn't have a popular face of the franchise to lead them into the debate. Bill King is a nice enough guy, but he was rejected by Houston voters while Bettencourt and (The Man who would be King) Dan Patrick are unlikable actors supported mainly by people living outside the city limits. It also doesn't help that the opposition has failed to keep its powder dry on many occasions in the past, instead of focusing on a few key issues affecting Houston's future. Deserved or not, what passes for conservative opposition in Houston is widely viewed as the "Party of No" because that seems to be their default for everything. At least on this King offered an alternate plan, which is out of character for the right-leaning groups in town.
To be clear, there can be no pension 'fix' until something is done to lower the funding obligations. As long as the pension rules stay the same (and the tweaks here for "cash-balancing" plans is not enough of a change) then the city will continue to find itself in danger of perpetually under-funding, or being forced to raise taxes to a level that the population drain becomes unsustainable.
Nothing in this bill addresses that, and there's no sign that Mayor Turner understands the problem, or that he would be inclined to address it even if he did. You don't get elected Mayor by stepping on the toes of those who have carried you your entire career after all.
That sucking sound you're hearing is not just the tax vacuum being turned on, it's the continued suction created by Houston's lack of leadership.
