For a moment, forget all the politics surrounding the Houston pension crisis or who gets the credit for trying to fix it. It is not about a rerun of the Mayor's race, or is it a possible referendum on the issue.
The fact is the city for years has over promised and under funded their plans and investment performance has lagged.
We should be thankful for Senator Paul Bettencourt's principled stand on the pension issue. He is in effect protecting current employees as a continuation of the current defined benefit plan for new hires only weakens an already weak system. We should also thank Senator Joan Huffman, who with grace and class has been trying to bring the parties who are at odds, back together - a truly thankless task.
For those with the city worried about the change, one can look at the Harris County plan, which has no financial issues.
Defined Contribution Pension Plans,
Better For Houston New Hires
By Josh McGee
Moving new employees to a defined contribution plan will not result in meaningfully higher costs for the legacy defined benefit system.
Steeply rising retirement costs and uncertainty about how high defined benefit pension costs might rise in the future have led many policymakers to consider adopting defined contribution plans, like private-sector 401(k)'s. Opponents of the reform have sought to derail these efforts by, among other things, claiming that any transition from status quo plans would result in significant, unforeseen costs. This memo briefly describes why these claims are inaccurate and provides additional background resources for readers who want to learn more.
Annual pension contributions are comprised of "normal cost," which is the cost of benefits earned by employees in a given year, and amortization cost, which is the cost to pay down any accumulated pension debt. Employees' annual contributions are used to pay for their own benefits (i.e., normal cost) and are not used to pay amortization cost. In fact, the employees may always choose to withdraw their own contributions from the plan, often with interest, instead of receiving a monthly annuity check in retirement. Employers generally contribute some amount towards the normal cost of the pension plan and fully cover amortizations payments.
The normal cost payments for new employees (employee plus employer) are used to fund the benefits earned by those employees. Those payments are in no way used to pay for the benefits of older employees, retirees, or to cover amortization costs. Since those normal cost payments are used solely to pay for the new benefits earned by new employees, moving those new employees and their normal cost payments to a defined contribution system would have no material financial impact on the legacy defined benefit system.
If new employees were placed in a defined contribution plan, the legacy defined benefit system would continue to be funded as it is today - by normal cost payments from participating members and their employers and by amortization payments, which are fully covered by the employer. Placing new employees in a defined contribution plan has no effect on either the real cost of benefits earned under the legacy system or the cost of paying off any funding shortfalls. Employers can continue to make amortization payments on the same schedule as a percentage of total payroll.
Public pension reform is arguably one of the most immediate and intractable financial problems facing all levels of government today. The underfunding of worker retirement benefits is irresponsible. Rising pension cost has placed undue political and budgetary pressure on workers' benefits, salaries, and even their jobs. Unfortunately, the next generation of public workers and taxpayers will be left to deal with this hefty fiscal burden unless we take action to fix the system.
Too often misguided transition cost claims frustrate reform efforts that would otherwise place governments on a more sustainable path. Policymakers should move beyond these misleading claims and adopt comprehensive reforms that better protect both workers and taxpayers.
Josh McGee is Chair of the Texas Pension Review Board and Vice President of the Arnold Foundation and is a leading retirement policy expert.
HISD Do-Over On Robin Hood
Last fall the Houston Chronicle, the Greater Houston Partnership and Mayor Turner all urged voters to vote to give school property taxes away under Robin Hood, by giving away the property.
It was a stupid idea then and TCR, along with the Democrat education experts Paul Colbert and former State Representative Scott Hochberg, were right to oppose giving away property to be taxed.
So now we will have a redo on May 6th, with early voting ending on May 2nd.
This time, vote so HISD keeps its rising property values with the hope that someday the school finance issue can be resolved without socking it to the taxpayers again.
What We Don't Need: A State Income Tax
Democratic activists have a "brilliant" idea (not) to give us a state income tax. To be clear, none of the current major taxes go away and why should they? Paternal government knows better than you, so we need to give them more and more money to spend on their schemes.
Of course they mention the things we all care about, public safety, infrastructure, schools and health care (?). The problem for too many cities and counties is that we don't fully fund our priorities. What a novel idea.
Clarity In Leadership, Trump Foreign Policy Makes The World Better
With thanks to Dennis Prager:
"If you prize clarity, then these past weeks were some of the best in memory."
"When America leads, the world is better.
For the first time in eight (8) years, the allies of America and the world's decent people celebrated America's return to leadership. Just about all of them understand that if the United States doesn't exercise its power, the worst regimes on Earth will.
"The left claims to care about the downtrodden of the world, but this concern is a moral fraud. The downtrodden the left most care about are American blacks, women, and gays. And Palestinians. But these groups aren't downtrodden; they are merely a vehicle by which the left attacks America and Israel to gain power. The truly downtrodden - that is, the most oppressed people in the world, such as Christians living in the Middle East, and the victims of Syrian President Bashar Assad's tyranny - know who really cares about them: Trump and America's conservatives.
"Likewise, Obama's do-nothing policies vis-à-vis North Korea are being contrasted with Trump's warnings to leader Kim Jung Un about further testing of intercontinental ballistic missiles and pressure on China's leaders to rein in the North Korean regime.
"The interminably repeated left-wing lie that Trump and Russian President Vladimir Putin are in cahoots has exploded. With Trump's military attack on Assad and verbal attacks on Russia, that claim has been shown to be what those with a little common sense knew it to be: a baseless, wholly made-up conspiracy theory meant to explain an election loss with which Democrats still haven't come to grips. In fact, President Trump has shown more backbone with Russia in his first 100 days in office than President Obama did in eight years.
"Given that factual and moral clarity are conservatism's greatest allies, we may be witnessing the beginning of a conservative Renaissance, the likes of which we haven't seen since the advent of progressivism."
Dennis Prager is a radio host on Salem (1070 AM), creator of Prager University and is a conservative political commentator.
TCR on the Air
Red, White & Blue featuring TCR Editor Gary Polland and liberal commentator David Jones on Fridays at 7:30 pm on PBS Houston Channel 8, replaying Saturday at 6:30 p.m. on Channel 8, Monday at 11:30 pm on Channel 8.2 and on the web at www.houstonpublicmedia.org.
About Your Editor
04-28-2017: Political Roundtable with guests Jay Aiyer & Brandon Rottinghaus, PhD.
05-05-2017: State of the City with Houston Mayor Sylvester Turner.
05-12-2017: Houston Chief of Police, Art Acevedo.
Gary Polland is a long-time conservative and Republican spokesman, fund-raiser, and leader who completed three terms as the Harris County Republican Chairman. During his three terms, Gary was described as the most successful county Chairman in America by Human Events - The National Conservative Weekly. He is in his nineteenth year of editing a newsletter dealing with key conservative and Republican issues. The last sixteen years he has edited Texas Conservative Review. As a public service for the last 13 years, Gary has published election guides for the GOP primary, general elections and city elections, all with the purpose of assisting conservative candidates. Gary is also in his 15th year of co-hosting Red, White and Blue on PBS Houston, longest running political talk show in Texas history. Gary is a practicing attorney and strategic consultant. He can be reached at (713) 621-6335.