401kRollover Blog

Houston’s pension costs are consuming most of the city’s budget. As more of the budget is allocated to cover the city’s high and rising pension costs, Houston is forced to cut back on other expenses such as road maintenance. Pension costs were a staggering $353 million this year whereas the city originally had a $59 million budget for road repairs. Even though the $59 million were not sufficient to fix all the damaged roads, lawmakers decided to reduce the number of road repairs by one third in order to put more money towards pension costs.  Even though the city has doubled property taxes in the past 15 years, the pension situation has not improved. Oil executive Don Hooper says that property taxes would have to be raised 50 percent over the next 11 years to cover Houston’s underfunded $5.3 billion.

As pensions are underfunded and services that benefit the public’s interest are cut or reduced, someone is benefiting from the current situation. Various unions including firefighters, police, and teachers unions have donated as much as $443,000 to state lawmakers. In return, the majority of lawmakers side with union interest. After 30 years of service a Houston firefighter can expect to retire with a pension amounting to 94 percent of his or her final salary. As if that were not generous enough, a firefighter can also expect to receive a one time payment between $700,000 and $1 million.

Pension laws in Texas are different than most other states. This means that pensions can legally be changed, the state only protects municipal pensions. Pension reform could change what is allocated to state or city workers without crossing any legal barriers. The only thing standing in the way are lawmakers; and if unions continue to donate generously, it is unlikely that lawmakers will vote to reform their pensions.

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