Senate bill would let Houston voters weigh in on fix to pension crisis

If the Texas Senate gets its way, Houston city officials could have to get voter approval for a plan to partially shore up massive, multi-billion-dollar shortfalls in some of the city’s public pension funds.

The Senate on Wednesday voted 21-10 to give preliminary approval of a bill that would require voters to sign off before cities issue pension obligation bonds, a kind of public debt that infuses retirement funds with lump-sum payments. Issuing $1 billion in those bonds is a linchpin of Houston officials’ proposal to decrease the city’s unfunded pension liabilities that are estimated to be at least $8 billion.

Houston Mayor Sylvester Turner told The Texas Tribune earlier this month that if the bill becomes law and voters reject the $1 billion bond proposition, a delicate and hard-fought plan to curb a growing pension crisis would be shrouded in uncertainty. He also argued that the debt already exists because the city will have to pay it at some point to make good on promises to pension members.

But lawmakers said voters should get to weigh in when cities take on such large amounts of bond debt.

"Of course the voters themselves should be the ultimate decider," said state Sen. Paul Bettencourt, R-Houston, who authored the bill.

Turner was not available for comment after Wednesday’s vote. He previously said that promising $1 billion to the police department and municipal employee retirement funds is how the city got those pension boards to agree to cut retiree benefits, which would further lower the unfunded liability. Lawmakers have yet to approve separate bills that would formalize those benefit cuts.

Turner also said the bond election bill’s passage could force the city to dig into its operations budget and come up with an additional $130 million payment for the police officer pension fund that would need to be made in the next fiscal year if the bonds aren’t approved by voters. That, Turner said, could force cuts to city services and would likely force City Hall to layoff employees.

“Mostly, the city’s budget is in personnel,” Turner said.

Dallas and Houston have among the country’s largest unfunded pension liabilities. Both cities are seeking legislative fixes to their pension woes. A House Pensions Committee hearing on a bill about Dallas’ pension system is slated for Monday. Houston officials are also trying to shore up a shortfall in the firefighter pension fund. Firefighters oppose the depth of proposed benefit cuts, and lawmakers say they are working to amend the most contentious terms. 

State Sen. Joan Huffman, R-Houston, said at a hearing on several pension bills last week that Houston voters would likely approve the pension bonds – and that she would publicly support the measure. Nonetheless, holding an election on the issue is worthwhile, she maintained.

“The voters want to have a say when the city takes on debt in this way,” she said.

Read more:

• The pension problems in Texas' largest cities have spurred massive account withdrawals, ongoing lawsuits, mounting political friction and national media attention.