Fire Fight: Houston’s pension battle heats up

fire fightMy column in the latest issue of Texas Monthly discusses the battle between Houston Mayor Annise Parker and the Houston Firefighters’ Relief and Retirement Fund. Parker has sued the pension fund twice, seeking to give the city more say over the contributions it’s required to make. The pension, though, has little incentive to come to the bargaining table.

The offices of the Houston Firefighters’ Relief and Retirement Fund are nestled in a wooded enclave near the George Bush Intercontinental Airport. On a cold, wet morning in early February, behind the glass doors and the blond-brick facade, the building offered refuge from the harsh reality outside. For more than 6,500 active firefighters and retirees, the HFRRF itself does exactly that, providing protection against forces that want to reduce their retirement benefits. And recently those forces—once relegated to the realm of argument and public pressure—have turned to a full-scale legal assault.

In January Mayor Annise Parker brought suit against the fund, seeking changes to a thirties-era state law that has left the city powerless to control the amount it must contribute to the firefighters’ retirement. The suit is the second in as many years, and Todd Clark, the fund’s chairman, says he has no intention of bending to Parker’s demands. Sitting in the HFRRF’s second-floor boardroom, Clark dismisses the lawsuits as a political vendetta against the firefighters, who supported Parker’s opponents in the past three elections. He claims that she wants to gain control of the pension and slash its benefits to pay for other city programs. “We’re being attacked by this mayor, and we’ve been attacked since day one,” he says. For her part, Parker claims that she simply wants to have a say in how much the city commits to retirees.

While Houston is faring better than many other cities, it is, like cash-strapped municipalities across the country, confronting an ugly truth: thanks to rising health care expenses and longer life spans, cities are finding it difficult, if not impossible, to afford the open-ended promises made to workers in years past. Pensions like the $3.7 billion managed by the HFRRF are an anachronism in the modern American workplace, where cheaper, “self-directed” retirement plans such as 401(k)s tend to dominate, at least in the private sector. Houston’s firefighters have a defined-benefit plan, which means the fund must pay for employees’ retirement benefits for as long as they live, regardless of the actual cost.

Generous public-sector pension plans have endured because city leaders have realized that boosting retirement benefits is a lot easier than raising salaries. Raises, after all, come out of the current budget. Pensions don’t have to be paid for decades—long after the current leaders are out of office. “It’s just a complete abdication of responsibility,” says Shad Rowe, a Dallas investment manager and a former member of the state’s Pension Review Board. “It isn’t a problem that gets better as you ignore it.”

Read more here.

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About lorensteffy

Loren Steffy is a writer, speaker and consultant. He is the author of Drowning in Oil: BP and the Reckless Pursuit of Profit published by McGraw-Hill in 2010 and The Man Who Thought Like a Ship, published by Texas A&M University Press in April 2012. A journalist for more than 25 years, he was most recently the business columnist for the Houston Chronicle.
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