In which the firefighters’ pension fund attempts to use a fight over assumption-setting to upend pension reform entirely. Published by Jane the Actuary View all posts by Jane the Actuary
4 thoughts on “Forbes post, “Pension Reform In Houston: A Fight Over Assumption-Setting Is Not What It Seems””
Dear Ms. Bauer,
Thank you for your interest and coverage of a Texas district court judge’s determination that the portion of a bill relating to the Houston firefighters’ Relief and Retirement Fund (or “Fund”) is unconstitutional. As Chairman of the Board of Trustees of the Fund I want to provide information that may help with the head-scratching confusion you wrote about on October 15 for Forbes.
First, it was not the firefighters’ union which filed suit, but rather the Houston Firefighters’ Relief and Retirement Fund. The union and the Fund are two separate entities.
Second, it has never been the “city’s obligation to determine the contribution” rate for the Fund.
Finally, the Texas Constitution contains specific provisions for the trustees of state and local pension funds; specifically, Article 16, section 67, vests the Board of Trustees for local pension systems with the exclusive power to “select legal counsel and an actuary and adopt sound actuarial assumptions to be used by the system or program.” The legislative intent of this constitutional provision was clear at the time of its passage in 1993. The Legislature feared that municipalities (like the City of Houston) which faced budget shortfalls might “raid” their pension funds to try to solve any economic crisis by manipulating actuarial assumptions: “Giving the boards of trustees explicit authority to choose their own legal counsel and the system’s actuary would alleviate any possibility of a conflict of interest with the government entity…System actuaries should have as their first priority the best interest of the members of the pension system, not the fiscal well-being of the government entity that employs them.” This is precisely the situation which occurred in 2017 when the City of Houston came to the Legislature.
In 2017, prior to the passage of the bill in question, the Fund asked the Legislature to address its constitutional concerns. One of our attorneys testified to the Legislature that “The passage of a bill which is constitutionally infirm at inception won’t solve [the problem at the City of Houston’s two other pension systems]. Two, or four or five years’ worth of litigation that determines the bill violates Article 16, Section 67 in the Texas Constitution, is not going to help the City of Houston and it’s not going to help the firefighters or anyone else who benefits from these pensions.”
In fact, throughout the process, the Legislators and City officials rejected several compromise options offered by the Fund which satisfied the constitutional thresholds and the City’s objectives for reducing pension costs. Despite the Fund’s pleas, Legislators refused to cure the constitutional defects thereby forcing the Fund to take the matter to court to defend its constitutional rights.
Over the last decade there have been countless examples in other jurisdictions where municipal and state governments shorted their employees’ pensions of the money needed to stay actuarially sound. The Texas Constitution has now prevented a similar crisis here. It is worth defending and we are proud to have done so.
Chairman, Board of Trustees
Houston Firefighters’ Relief and Retirement Fund
Thanks to our hard working HFRRF Board . God Bless Yall