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Press Room

Texas Legislature Approves Houston Pension Solution

May 25, 2017 -- This week in a historic effort, by a vote of 25-5 in the Senate and a vote of 103-43 in the House, the Texas Legislature approved comprehensive reform measures for Houston's three employee pension systems! With passage of the Houston Pension Solution, the City is one step closer to reducing debt and securing long-term financial health, while providing municipal workers, firefighters, and police officers with sustainable pensions. The City is confident that Governor Greg Abbott will sign the bill into law in the coming days.

The bill approval comes after the Texas Senate passed pension reform by a 25-5 vote on May 1. One week later, the Texas House voted 115-29 to approve the City's pension reform measures, but only after adding amendments to the Senate's bill. To resolve the differences between the two versions, a conference committee convened and ultimately agreed to remove three of the amendments, including one offered by Rep. Dwayne Bohac, which exempted Houston's retired firefighters from benefit cuts, and would have added an estimated $400 million to the City's unfunded pension liability. As required by this week's approved legislation - and the final step in achieving pension reform - a referendum on pension obligation bonds will appear on the ballot for Houston voters in November.

The pension reform package will reduce the City's $8.2 billion in unfunded pension liability by more than 30 percent, and set a hard 30-year deadline to eliminate the remaining unfunded debt. Specifically, the City will issue $1 billion in bonds to pay off pension debt in connection with the underfunded municipal and police pension systems over a closed 30-year amortization. The pension plan also calls for immediate cost reductions in the three pension plans. In a sacrifice that will impact families, but were necessary to make Houston's fiscal health sustainable and keep costs affordable to taxpayers, employees agreed to approximately $2.8 billion in reductions that include cost of living adjustments. Finally, the pension reform plan includes the corridor concept, which limits the amount to be spent each year for pension benefits. Should anticipated pension costs rise above this limit, the corridor requires the City and the pension systems to return to the negotiation table to make corrections.

The success of Houston pension reform is still contingent on the will of the voters. If the pension obligation bond ballot measure does not pass in November, the police officers' pension reductions will not take effect, and municipal workers may opt out of their share of the $2.8 billion in cuts across all pension systems.

"Implementation of these pension reform measures is crucial to creating a more stable financial future for our city," said Council Member Amanda Edwards. Edwards continued, "Achieving passage of the Houston Pension Solution is an historic accomplishment, and I congratulate Mayor Turner; the Houston Municipal Employees Pension System; the Houston Firefighters' Relief and Retirement Fund; the Houston Police Officers' Pension System; the Greater Houston Partnership; the City's Finance, Legal, and Government Relations teams; and countless others for the leadership, innovative problem solving, and advocacy that made these reforms possible. I cannot overstate the significance of having all three pension systems come together to work with City leaders to commit to shared sacrifice and long-term solutions to the pension problem."