City of Houston SustainablePensions

Dear Houstonians,

They said it couldn't be done; but in Houston, we always get it done. Houstonians came together and achieved historic pension reform, lifting a significant barrier to progress in our city. Our victory on pension reform is substantial. We immediately reduced a debt of $8.2 billion and put in place a responsible plan to pay off the balance over 30 years - just like the mortgage on a house. The plan also requires the city to make the payments in full and on time - just like every Houstonian with a mortgage is required to do - and protects the city from cost increases due to economic downturns.

All that is left is for voters to approve a necessary component of the plan, pension obligation bonds, in November. When I asked to become your mayor, I asked all Houstonians, in a spirit of shared sacrifice, to chip in to solve these problems. Our city workers and retirees did their part by accepting $2.85 billion in reductions to their pension benefits. Now it's time for us to do our part to lift up our families, our neighborhoods and our city!

Sincerely,

Sylvester Turner
Mayor

What the Experts are Saying

The Solution

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 solution 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 $8.2 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.
  • The City had borrowed more than $1 billion from pension systems. To pay back the debt, the City will issue pension obligation bonds, pending voter approval in November.

Why It's Called a "National Model"

  • Under the old plan, if investments did not meet expectations, the City had to make up the difference. The solution 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 were in open amortization - we would never pay off the debt. The solution 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. The solution is budget neutral.

Newsroom chevron_right

In Texas, Some Rare Good News About Cities With Pension Woes

"We have to have a fair pension system, both for us and for taxpayers," said Mr. Hunt of the Houston police union.

The New York Times • 6/1/17

Texas Governor signs Dallas, Houston pension bills

Texas Governor Greg Abbott signed into law on Wednesday a bill aimed at addressing public pension problems in the state's two biggest cities, Dallas and Houston.

Reuters • 5/31/17

Turner's Moment

Give Mayor Sylvester Turner credit. In less than 18 months, Turner has pulled off what once seemed an impossibly complicated task.

Houston Chronicle • 5/25/17

Texas Legislature passes Houston pension reform bill

The Texas Legislature on Wednesday approved a pension reform bill for Houston's three pension funds. The measure passed the House by a 103-43 vote on Wednesday, a day after it passed the Senate.

Pensions & Investments • 5/25/17

Videos

Texas House concurs on Senate Bill 2190

Lege TV

The Texas House of Representatives takes its final vote concurring on changes to Senate Bill 2190, the Houston Pension Solution.

Texas Senate passes Senate Bill 2190

Lege TV

The Texas Senate votes to pass Senate Bill 2190, the Houston Pension Solution.

Supporting Documents