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. The bill includes benefit reductions for participants in the three pension funds that would help reduce the $8.2 billion in total unfunded liabilities.
The pension reform package also requires Houston to make the full annual required contributions to the $3.9 billion Houston Police Officers' Pension System, $3.8 billion Houston Firefighters' Relief and Retirement Fund and $2.3 billion Houston Municipal Employees Pension System; adopts a 30-year closed amortization schedule to pay off the remaining unfunded liabilities across the three pension funds; and calls for the issuance of pension obligation bonds to further reduce liabilities.
The plan further reduces the pension funds' assumed rates of return to 7% from the current rates — which range between 8% and 8.5% — and introduces a cost management mechanism, under which benefits would be reduced or employee contributions would increase if investments perform too far below established levels, according to a news release from the mayor's office.
Houston Mayor Sylvester Turner praised the passage of the bill Wednesday, but noted that more work has to be done to shore up the city's finances.
“What passed today does not solve our fiscal problems. We will still have to close a significant budget gap this year, and we project lean times in the next few years,” said Mr. Turner in the release. “However, passage of this bill lifts a tremendous burden on the city's ability to fully serve all its residents.”
Wednesday's bill was a compromise bill and excludes amendments friendly to firefighters that were previously passed by the House.
The final version was supported by the municipal and police pension fund boards, the mayor's release noted.
Houston fire pension plan officials could not be reached for comment by press time.