The Texas House easily passed Houston’s pension reform bill Monday, but not without making several changes friendly to firefighters, setting the stage for a reconciliation showdown between the upper and lower chambers.
The House accepted four amendments to the bill the Senate passed last week, before voting 112 – 28 to preliminarily approve Houston’s reform measures. The bill now awaits another vote in the House before heading to conference committee, where legislators would seek to achieve consensus.
Mayor Sylvester Turner heralded the bill’s passage, calling the vote “epic” despite his opposition to three of the four amendments.
“It marks a tremendous evolution,” Turner said. “This ship has sailed, and it’s picking up a whole lot of wind behind its sails.”
The reforms hardly would erase Houston’s financial woes, but they would put the city on track to stem a fiscal crisis that would have continued to erode core services and forced hundreds of employee layoffs.
Specifically, the Senate’s version of the bill would position the city to pay down its $8.2 billion pension debt over 30 years instead of allowing it to accumulate, cut retiree benefits by $2.8 billion and cap future costs if the market dips.
Those fixes immediately would improve Houston’s budget outlook, reducing next year’s deficit to about $123 million from $234 million. The changes also could help boost the city’s recently downgraded credit rating, making it cheaper for Houston to finance improvements.
“I believe this current version is Houston’s best chance to significantly have pension reform and to assure that the fire, the police and municipal employees will have an ongoing pension,” Rep. Dan Flynn, R-Canton and the bill’s House sponsor, told lawmakers before their vote.”
The House’s amendments mean the bill’s fate is far from sealed, however.
An amendment by Rep. Dwayne Bohac, R-Houston, exempting more than 3,100 retired firefighters from benefit cuts would have the largest financial impact, adding an estimated $400 million to Houston’s unfunded liability, according to the city.
“This amendment is about keeping a promise,” Bohac said.
The House also approved an amendment by Rep. Dan Huberty, R-Houston, to give firefighters additional time to provide actuarial data to the city in an effort to negotiate smaller benefit cuts.
The Houston Firefighters Relief and Retirement Fund had joined police and municipal worker groups in backing preliminary reform terms last fall, but did not join their counterparts in agreeing to final legislative language, saying the final cuts were too deep.
“I’m not against Houston,” Huberty told lawmakers. “I’m giving the firefighters an opportunity to be able to provide the data that the city has asked for.”
Rep. Mike Schofield, R-Katy, meanwhile, modified the bill to make firefighters’ benefit cuts contingent on voters’ November approval of $1 billion in pension obligation bonds, which Turner wants to inject into the underfunded police and municipal pensions.
Turner initially opposed the Senate bill’s requirement for a public vote on the pension bonds, calling it a “poison pill,” but has since accepted the provision.
Flynn, who also offered his own technical amendment, intended to try to persuade the House to reject the others.
“This could derail the bill,” he told House members, asking them to defeat Huberty’s amendment.
The House, which had come under intense lobbying pressure from firefighters across Texas in recent days, refused to kill Huberty’s amendment, voting 90-42 to attach it to the bill, as nearly 100 retired firefighters in the gallery erupted in cheers and whistles.
Having lost that vote, Flynn later accepted Schofield’s and Bohac’s changes.
“Once it was going to conference, you just get the overall bill approved and then you can decide which amendments to strip out in conference committee,” said Rep. Garnet Coleman, D-Houston, and a co-sponsor of the measure. “That’s how the process works.”
Some of the reform plan’s key supporters worried the House’s changes could derail final approval before the Legislature adjourns on May 29.
Turner, who opposes all but Flynn’s amendment, said he feels confident heading into conference committee.
He singled out Bohac’s changes for their estimated $27 million annual cost.
“For a fiscal conservative, I take issue with that amendment,” he said. “The whole notion of the pension solutions was to reduce cost and to put our financial house in order.”
Police union on board
Ray Hunt, president of the Houston Police Officers Union, cheered the bill’s passage and said he anticipates Senate and House negotiators would strip Bohac’s provision from the final version of the bill.
David Keller, chairman of the fire pension board, said he views the House version as an improvement. “The amendments lessen the impact to some degree,” he said. “And it slows the process.”
Even if the reform package makes it across Gov. Greg Abbott’s desk and the pension bonds pass, Houston still faces fiscal challenges that include closing this year’s budget gap, paying down at least $4 billion in pension debt over 30 years and reversing the erosion of city services.
Seeking to reinvest, Turner has promised that if pension reform passes, he will ask voters in November to repeal the city’s cap on property tax collections.
That means this fall’s municipal ballot could include referendums lifting the revenue cap, allowing the city to issue $1 billion in pension obligation bonds and – if Houston’s city secretary certifies the petition signatures -requiring city workers hired after the start of 2018 to shift to 401(k)-style defined contribution plans.
Breaking down Houston’s pension reform