Houston pension fix highlights Dallas struggles

Pension panic

HOUSTON -- The Dallas police and fire pension system crisis continues to drag down the city’s credit rating and torpedo morale among first responders.

But Dallas isn’t alone. Cities across the United States are struggling with huge financial shortfalls in public employee pension funds.

What does Dallas need to do to fix its problem?

We hit the road seeking answers in Houston, which, like Dallas, has public sector pensions in the hole billions of dollars.

After 10 months of negotiations, the Houston City Council in October did what three prior Houston mayoral administrations had failed to do – announced a compromise.

“It hasn't been easy,” said Houston mayor Sylvester Turner.

Within weeks after taking office a year ago, Turner gathered Houston police, fire and city employee pension board representatives around a table.

They ended up with a deal that lowers Houston’s $7.5 billion pension debts by a third, sets a hard 30-year payoff for what’s left and issues $1 billion in bonds – or city loans – to help with the rest of the shortfall.

As part of the compromise plan, the city of Houston agreed to pay back what it owes the pension system instead of withholding contributions, which it had been doing for years. The city also promised to fully fund its obligation to the funds every year.

Houston pensioners agreed to give up some benefits, such as reducing cost of living adjustments, increase employee payroll contributions and phase out the system’s Deferred Retirement Option Plan, known as DROP, that lets current employees bank retirement benefits while they are still working.

“It's a pay cut,” said Ray Hunt, president of the Houston Police Officers Union. “But it's also something that has to be done in order to make the system solvent.”

He said their members understand that “doing nothing is not an option,” he said. “Doing nothing means the system is going to implode.”

Back in Dallas, the city and pensioners remain at odds.

Police and fire pension system members last month voted down making cuts to their own benefits in order to help preserve the overall fund. Rank and file members are furious with Mayor Mike Rawlings for suing the pension system. The mayor has said he was forced to file the lawsuit to keep the membership from withdrawing too much money, creating a “run on the bank” that could have bankrupted the fund within days instead of years.

“I haven't come in and single handedly said … ‘You aren't going to have any say so,' and 'This is the way its going to be,’” Turner said of his own approach to his city's crisis.

Houston’s pension reform agreement will now have to secure approval of the Texas Legislature, which controls municipal pensions. For Mayor Turner, who spent two decades as a state representative, the statehouse is familiar territory.

“I know that there are some people who are saying ‘yes,’ who are circling to the legislature and quietly saying ‘no,’” he said. “But the good news is, I've been there. I know how it’s played.”

Turner is hesitant to lecture other cities in the same boat, like Dallas. But he did offer this advice:

“Recognize that behind every pension plan is an employee who made a contribution to the city. And employees have to recognize that there is a city with people in it that also have to pay the tab. And so we are all connected. And everyone has to sacrifice for the greater good of the city.”

If Dallas City leaders and its pension board continue to disagree on a fix, lawmakers in Austin have made it clear they are prepared to hand down their own cuts, which almost certainly won't be what either side wants.

Email investigates@wfaa.com

Copyright 2016 WFAA


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