At a recent City Council Budget and Fiscal Affairs Committee meeting, the City’s representative made a presentation on a variety of pension-related topics. The presentation summarized a report prepared by the City’s actuary, Retirement Horizons Inc. (RHI), that the City commissioned and that attempts to identify “cost savings” that can be realized through proposed cuts to benefits.
We have reviewed the RHI Report and identified numerous faulty assumptions and factual misstatements that make the Report’s conclusions questionable and impossible to judge. HMEPS has prepared and submitted a response to the City that addresses the report’s inaccuracies and deficiencies, including its failure to acknowledge the hundreds of millions of dollars in future benefit reductions and savings that have been achieved through reforms that have already been implemented. You can read our full response here.
The RHI report ignores previous reforms. The City’s Report appears to claim that great improvements in the HMEPS funded level and in City contributions will occur over the next several decades if suggested pension cuts are made. But significant improvements will happen due to the reforms that have already been achieved over the last decade through the Meet and Confer process. These reforms eliminated over $850 million in future benefits and will lead to full funding of HMEPS within approximately 30 years with the City paying what it agreed to pay and without any further diminishment of benefits.
HMEPS and City leaders worked together over the past decade to make significant reforms to the plan to fix the liabilities and give the City a schedule for putting in the right amount of money. The City’s pension representative has reported that the HMEPS liabilities have been fixed. The other side of the equation requires the City to properly fund its obligations. However, when it comes time to pay what it owes, manufactured numbers in this City-commissioned Report are being used to strike at the core of retirement security by proposing cuts to benefits. These are benefits that the men and women who work for the City have earned honestly and with the reasonable expectation that those earned benefits will be provided in exchange for the services that help make this City great and that will benefit Houstonians for generations to come.
It is fashionable to scapegoat pensions as the principal source of the City’s finance challenges, but the reality is much more complicated and involves revenue, spending, debt service and how the City plans long-term and manages its total commitments. However, we note that Council Member Stephen C. Costello, Chairman of City Council’s Budget & Fiscal Affairs Committee, just released a new City Draft Financial Policy which includes “financing all post-employment and employee benefit systems in a manner to systematically fully fund all liabilities,” and which attempts to address the other more significant drivers of the City’s financial challenges. All stakeholders deserve a comprehensive review and discussion and not one solely focused on pensions.
As always, HMEPS strives to keep participants informed, and will work to provide a secure retirement benefit now and for decades to come.
Sincerely,
Sherry Mose
Chairman