There are 13 city retirement systems that have become codified in state law by our Legislature.
The state has positioned itself between local taxpayers and their representatives, hindering local control of a major public policy matter in these communities. It significantly limits local systems from reforming their plans because regardless of any proposed changes, municipal leaders must navigate the legislative process to make any changes.
We urge state lawmakers this next legislative session to make it easier for local officials to reform local plans.
Local employees who invest in the plans and taxpayers should be the ones who make decisions about these pension plans. While there are some issues that Austin should regulate, this should not be one of them.
For example, last year Houston officials agreed on changes to the Houston Firefighters’ Relief and Retirement Fund. Even though all the local officials agreed to the terms of the changes, they still had to be approved by the Legislature. Unfortunately, that did not happen.
In this case, the agreement could have been enacted immediately if local officials had control over the issues that affect them directly. Now, these changes will have to wait until the next legislative session, which means two more years of financial implications before the opportunity for corrections and approval by the state.
Sometime soon, all these plans will need major reforms to stay solvent and meet the promises that have been made to retirees and local employees. Currently, all these funds have billions of dollars in unfunded liabilities.
These funds represent 50,000 retirees and have approximately $8.7 billion in unfunded mandates. It would take a check of more than $171,000 from every active member in those plans to balance things out. This is unrealistic.
All our retirement systems face tough choices to stay solvent or regain solvency.
In this case, however, the financial problems of these local systems can hurt a city’s ability to borrow money for other projects.
Moody’s, the major bond rating company, lowered the credit ratings of both Dallas and Houston, in part because of solvency issues with their municipal pension plans.
San Antonio, thanks to our city’s leadership, has maintained its triple-A bond rating. How much longer will the city be able to maintain it if we are unable to make changes to keep it that way?
Limiting a city’s ability in the bond market hurts local taxpayers. It means that needed projects could be put off, or that those projects will cost local taxpayers more because of higher interest rates on the borrowed money.
Not every issue is ripe for local control. There are some issues that the state should be involved in so that there isn’t a patchwork of confusing rules and regulations from city to city.
In this case, however, the state should not be involved because it does not represent the interests of local taxpayers.
The people who are directly impacted by these financial decisions should be the ones making them, not state lawmakers.
Gary Gibson is board chairman-elect of the Texas Association of Business.