Monday, November 07, 2016
Houston PD pension mess could spur officer departures. Should we care?
Houston PD could see more officers retire soon as a result of the proposed pension deal Mayor Sylvester Turner negotiated with the unions, reported the Houston Chronicle last week. City leaders say "huge numbers of first responders are eligible to retire" immediately. In all, "37 percent of police officers and 25 percent of firefighters today are eligible to begin drawing pension checks." The fear is that ending super-generous, budget-busting benefits will spur more officers to leave sooner than later.
OTOH, doing nothing isn't an option. And the new recruits who replace aging officers will cost the pension fund (and city budget) less. Even so, it's unlikely that the deal cut will resolve the problem. The new deal slightly boosts employee contributions and lowers the expected rate of return from 8 percent to 7, but IMO that's still a wildly unrealistic number that I don't believe can be sustained for 30 years. If I'm right, the pension fund won't be solvent in three decades, as promised.
The article expressed a particular worry that the department will lose staff at the commander level, but in Grits' view that should be the least of their concerns. Let's face it: Has the department really been run so well that they can't afford for top managers to be replaced?
Houston relies on defined benefit plans for officers which are far more generous than anything seen these days in the private sector. Under the new deal, many officers could retire when their age plus years of service equals 70 and then collect full benefits for the rest of their lives. Who else gets to retire at 50 with a guaranteed income for life? Certainly not most taxpayers in Houston footing the bills.
Bottom line, like so many US cities, politicians in Houston promised police and firefighters unions far more in benefits than taxpayers could afford, drastically underfunding pensions and assuming way-too-high rates of return on investment. Now, the politicians who made those promises are long gone and those financial chickens are coming home to roost. The transition from this unsustainable scenario will not come without disruption, and won't be limited to Houston, either.