This is the first of a two-part story on Houston’s pension crisis. The second part of this story is here.
The answer to Houston’s $13 billion dollar pension crisis is quite simple.
It’s right there in a bill by state Rep. Jim Murphy, just 293 words returning control of 13 pension funds, including Houston’s, to the cities that pay for them.
If only state lawmakers wanted to give up their authority and local officials wanted it back. And if the employee unions that support them decided they didn’t really want such generous pensions.
In 48 other states, pension reform is complicated. Court rulings there have created pension guarantees that range from nearly bankruptcy-proof at the low end all the way up to Ark of the Covenant levels of untouchability.
But in Texas, if Murphy’s 293 words became law, Houston’s public employees would suddenly be at the mercy of city officials. Even vested benefits could disappear.
In most states, municipal pensions are handled by local officials through a collective bargaining process. But in Texas, the Legislature seized control of the biggest local funds in 1989 and started dictating pension terms to local governments.
The unions, in turn, seized control of the lawmakers.
Over the past two election cycles, the Houston firefighter and police local unions have donated $443,000 and $290,000, respectively, to state lawmakers, more than the next four unions — all state teacher associations — combined, according to records maintained by the National Institute on Money in State Politics.
Aside from teachers’ groups lobbying against school choice, there’s really only one major labor controversy in Texas: the Houston unions, whose best deal pays firefighters retiring after 30 years an average of 94 percent of their final salary, plus a one-time payout of between $700,000 and $1 million, one of the most generous payouts in the country.
Unfortunately for Murphy and his bill, there isn’t much of a dispute. Public sector unions have purchased support from the far left to the far right.
Pro-union Republican Speaker Joe Straus leads all lawmakers over the past two cycles, with $144,250.
Seven of the next 10 names on the list are Houston-area lawmakers: Sens. John Whitmire, Joan Huffman, and Sylvia Garcia, and Reps. Carol Alvarado, Garnet Coleman, Sylvester Turner, and Alma Allen (career totals linked to names; two-cycle totals here).
Huffman, who chairs the Senate committee overseeing pensions, is the only Republican of the seven. In the latest session, Huffman’s committee refused to grant a hearing to a companion to Murphy’s bill filed by state Sen. Paul Bettencourt.
Lt. Gov. Dan Patrick, the man who gave Huffman her chair, pulled in $81,990 from public sector unions over the past two cycles, $52,500 of it coming from Houston police and firefighters.
The dynamics are as simple as they are discouraging. Austin refuses to take responsibility for municipal pension troubles, even though costs and benefit levels are set by state law.
Legislative leaders defer to the Houston lawmakers, most of whom happily side with union and against public interests.
The Houston City Council is content to duck the issue, blame Austin and fail year after year to make even the minimum payment on backloaded pension financing plans.
The unions can’t force the city to pay, but as long as they’ve got lawmakers in their pocket, the city can’t cut its costs, either. So debt piles up.
Just one Houston official, City Councilman Stephen Costello, who is running for mayor, even bothered to argue in favor of Murphy’s bill at a legislative hearing earlier this year. Costello pointed out that 31 percent of the city’s salary costs went for pensions.
The committee let Murphy’s bill die without so much as taking a vote.
Houston businessman James Noteware explained the dynamic to lawmakers at the April 20 hearing.
“Houston’s leaders can point to Austin, say they don’t have adequate control and kick the can down the road,” he said. “The employee unions are freed from entering into the economic reality and discipline of labor negotiations, because they too can come to Austin. You (the Legislature) are not fully aware of the problems and have little responsibility, directly, for the consequences.”
“No one, no single entity is accountable, and the situation has begun to deteriorate,” he concluded.
Murphy’s bill would change that and not for the better, according to union officials.
“This legislation could change benefit levels without any inputs from the members,” Todd Clark, chairman of the Houston Firefighters Relief and Retirement Fund, said.
So one-sided is the firefighters’ union contract that it forces Houston Mayor Annise Parker, a liberal who has been fighting the firefighters’ pension fund for years with nothing to show for it, to officially oppose this sort of reform, Christopher Newport, her chief of staff, told lawmakers. The union contract requires that to be her opinion, he said.
Even if Murphy’s bill were ever to pass, the local officials setting terms with the unions would almost certainly be a liberal, pro-union majority rewarded with generous union donations for their re-election campaigns. Like the $10,000 check the firefighters gave Sylvester Turner in June for his mayoral race.
As a Houston oil executive put it to lawmakers, why would the unions be afraid of local control in a city as liberal as Houston?
“Are they scared of Annise Parker,” he asked. “Or Sylvester Turner? These are some of the most liberal politicians in the state of Texas.”
They know, however, that Houston’s growing budget pressures have the potential to turn even the Parkers and Turners of the world into milder versions of Scott Walker, the union-busting Wisconsin governor. Straus, on the other hand, depends on the support of a center/left/labor coalition to keep his speakership.
From California to Detroit, local officials in broke cities are finding their ruinous pension guarantees nearly impossible to get out of. A few federal court rulings have opened the avenue of bankruptcy proceedings to shed the debt, but 22 states don’t allow cities to declare bankruptcy.
Texas is different. Reform is legally possible. The politics are another story.