City of Houston SustainablePensions

Dear Houstonians,

When you find yourself in a hole, the first order of business is to stop digging. That's what we did - and pardon the pun here - with the pothole crisis. That's what we did with the biggest budget gap since the Great Recession. And that's what we are now doing with pensions. That's historic, but the even bigger news is the renewal of the can do attitude and cooperative spirit that has served our city well since its founding. Instead of continuing to fight as they have in the past, a broad spectrum of Houstonians are now putting aside their differences and working together to dig us out of this financial hole.

Through their pension governing boards, our City employees have put $2.5 billion of concessions on the table. These hard-working public servants are giving up benefits to which they are entitled in order to create a more stable future for our city. City leaders are promising to no longer fudge on what we owe to City employees every year. The business community and legislative delegation are helping to get the plan enacted into law. And, as I have said many times before, I will later ask taxpayers to step up and share in these sacrifices by agreeing to repeal the revenue cap that is crippling the City's ability to meet its growing needs.

To read the full text of my announcement, go here.

Sincerely,

Sylvester Turner
Mayor

What the Experts are Saying

The Plan

Real Numbers for a Real Solution

  • For the first time, the pension boards are opening their books. All gains and losses will be recognized.
  • The current assumed rate of return is too high. The proposal implements a more realistic rate of return of 7 percent, which is in line with national standards.
  • After recognizing all our gains and losses and using a more realistic rate of return, we know that our real unfunded liability is $8.1 billion. Only by using real numbers do we understand the true extent of the problem, and only then are we able to fully address it.

Why This Has Been Called a "National Model"

  • Currently, if investments do not meet expectations, the City has to make up the difference. The proposal implements a "cost corridor" so that the City's contributions are capped. If investments perform too far below established levels, the pension boards will cut benefits or increase employee contributions to bring costs in line.
  • Houston's pension systems are currently in open amortization - we will never pay off the debt. The proposal places the systems in closed amortization - we treat the debt like a mortgage, paying it off in 30 years.
  • There are no new taxes needed for the City to meet its obligations under the proposal. The plan is budget neutral.

Newsroom chevron_right

The Great Texas Pension Fix

Houston owes its police, fire, and city workers about $7.8 billion, and it doesn't exactly have the cash on hand. Their hard-fought solution could serve as a model for the rest of Texas, and the nation.

CityLab • 1/18/17

A pension deal in Houston? Miracles really can happen

In a 7-2 vote this week, their pension board agreed for the first time ever to cut benefits for current workers and retirees. The pension boards for police, fire and municipal workers simply may have trusted Turner more than past negotiators...

Houston Chronicle • 10/25/16

Houston's Plan to Cut Pension Costs in Half Overnight

Mayor Sylvester Turner is garnering praise for his proposal's comprehensiveness and balance.

Governing Magazine • 9/29/16

Experts Weigh in on Houston Mayor's Pension Proposal

Experts organized by the Kinder Institute for Urban Research weighed in Houston Mayor Sylvester Turner's newly-unveiled pension reform proposal at a panel discussion Tuesday - the same s ay ratings agency Fitch concluded that Turner's proposal "could improve the sustainability of the city's pensions."

Kinder Institute • 9/21/16

Videos

Houston pension fix highlights Dallas struggles

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.

WFAA

Supporting Documents