In a recent opinion piece in the Houston Chronicle – “Houston, there is a pension problem” (October 1, 2014) — Daniel DiSalvo, a fellow at the Manhattan Institute provided inaccurate and misleading information regarding the Houston Municipal Employees Pension System (HMEPS).
- Mr. DiSalvo first asserts that the City of Houston’s “fiscal prudence is under pressure from rising public employee pension and health care costs,” but proceeds to single out only pensions for criticism. Not only is there no analysis of health care costs’ impact on City finances, there is no mention at all of overall spending, revenue, debt service or how the City plans long term and manages its total financial commitments. Thus the piece unfairly leaves the impression that only pensions are to blame for the City’s fiscal challenges, while the reality is far more complicated.
- DiSalvo criticizes HMEPS as being only 61% funded, but does not mention that a substantial portion of the system’s current unfunded liability is due to the City not making its actuarially required contribution (ARC) payments to HMEPS in recent years. In fact, a mutually agreed upon funding schedule will, over time, meet the ARC requirements and reduce HMEPS’ unfunded liability.
- Mr. DiSalvo states that “pension payments are projected to gobble up 17% of the City’s budget by 2017.” In fact, the City projects that 13.9% of spending in 2017 will be for pensions. (Click here for a presentation from the July 29, 2014 Budget and Fiscal Affairs Committee.) HMEPS makes up only about 3% of the 2017 number. DiSalvo’s overstatement is likely the result of having calculated the pension contributions for all employees as a percentage of the City’s “General Fund.” This significantly overstates the percentage because there are thousands of employees who are not paid from the General Fund. This is a common error.
- What are the true costs to Houston taxpayers for pensions? A recent study by the Center for Retirement Research at Boston College, which was called by the New York Times “the nations leading center on retirement studies,”– found that Houston’s pension cost to taxpayers is below average (5.1% of government revenue), and far below those of other major cities, as shown in the following graph:
Public employees did not create the City’s financial problems, but HMEPS has worked with the City to be part of a reasonable, fair, long-term solution to those problems.
Sincerely,
Sherry Mose
Chairman