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March 15, 2004
Houston, We Have a Pension Problem
In September, Texas voters approved Proposition 15, which says no city can reduce or impair pension benefits that have already been accrued by vested employees and retirees.

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But on May 15, Houston voters will be asked to decide whether their city should be allowed to opt out of the rule.

The request comes from Mayor Bill White, who has said he needs the opt-out provision to give the city flexibility in dealing with projections of a $1.5 billion shortfall in the pensions of all employees except police and firefighters over the next 18 years. The police and firefighter funds are considered to be in better financial shape, according to the Houston Chronicle.

White said he doesn't know yet what he'd do if voters gave him the opt-out authority. But something has to be done, he said, because of incorrect pension assumptions made in 2001. They will leave taxpayers with an extra $100 million per year price tag to close the pension funding gap, the Chronicle reports.

"I can't say where we are going to go because we need due process," White said. "It takes time to consider all alternatives and to hear all views, so there is no timetable."

The Houston City Council voted unanimously Wednesday to set a May 15 election that could allow the city to opt out of a state constitutional amendment that locks in generous pension benefits for city workers.

But as the City Council voted last week to go along with holding the referendum, some employees told the Chronicle of plans to retire before the May 15 vote, in hopes of preserving their current pension levels.

White, along with the city's three pension funds, maintained there'd be no advantage in that. The fund directors all pointed out that benefits can only be changed by the legislature, which doesn't meet until 2005, or by a formal agreement between the city and the fund's governing board, controlled by pension members. Each fund has slightly different rules.

White specifically said that he will ensure that no employee gains from leaving early. "I'm not going to create any advantage to retiring," he said.

The controversy has generated allegations that the current pension plan, if left alone, would let some employees retire as millionaires. The employees angrily deny it, and even the mayor scoffs at the idea. But the Chronicle reports that an analysis conducted by Actuarial Service Co. shows it could happen.


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