SENATE PASSES HOUSTON PENSION FIX
(AUSTIN) — The Senate on Monday approved a measure that its author says must pass in order to ensure the pension funds for Houston firefighters, police officers and city employees remain fiscally sound. Houston has one of the highest pension obligations relative to revenue in the nation and currently faces about $7.8 billion in unfunded liabilities. As these liabilities continue to grow, bill author and Houston Senator Joan Huffman said the system must be fixed if the pension funds are going to last. "The current situation is straining the city's finances and putting the city at risk of not reaching its pension obligations in the future," she said. Her bill, SB 2190, aims to head off potential bankruptcy of the city's three main pension funds.
Houston Senator Joan Huffman says she believes her bill is the city’s best chance at significant pension reform.
Police, firefighters and city workers would take reductions in retirement benefits in exchange for $1 billion in funds to shore up the current system. These funds would be provided through the issuance of pension obligation bonds. The bonds don't create new debt for the city, but pays back the police and municipal pension funds for underfunding past pension contributions. Issuance of bonds is subject to voter approval, but if the bond measure doesn't pass, the bill would then roll back the proposed benefit reductions for pensioners. The proposed benefit reductions would reduce current pension liabilities by $2.54 billion and the bill would increase employee and employer contributions into the fund.
Other provisions in the bill would require that the fund maintain solvency, so that it could pay off its entire unfunded liability within 30 years, similar to a home mortgage. Should the proposed fixes not meet expectations, the bill would trigger a change in benefit structure for new hires, beginning in 2021 for police and fire and 2027 for municipal employees, moving them into a cash balance system rather than the current defined-benefits structure. It would also lower the expected investment returns to what Huffman says is a more realistic seven percent.
Also Monday, the Senate approved an extension to a program that gives students an alternate path to graduation. Current law requires that high school students pass STAAR end-of-course exams in English I and II, Biology, Algebra I and U.S. History. Last session, the Legislature approved the creation of an alternate path for students who fail no more than two end-of-course exams and have completed all other graduation requirements. These students could ask for the formation of an individual graduation committee, made up of the teacher in the course for which the student failed the exam, the school principal and the student's parents. This panel assigns additional course work in the subject and reviews the entirety of the student's educational career. If the panel unanimously recommends that the student graduate, then they can walk the stage with the rest of their classmates and move on to college, the military or the workforce.
The original measure passed last session was authored by Amarillo Senator Kel Seliger. In a committee hearing on the bill in April, Seliger said that less than three percent, about 12,000 students, of last year's graduating class used this method to graduate. The program was slated to expire this fall, but the bill approved today, SB 463 by Seliger, would extend the deadline for two more years, into 2019. It now heads to the House for consideration.
The Senate will reconvene Tuesday, May 2 at 11 a.m.