Six months ago Mayor Annise Parker and the Houston City Council commissioned the Long Range Financial Management Task Force to assess the fiscal challenges that face Houston over the next 20 years and suggest responses. The task force was made up of five citizen volunteers and 11 city employees including representatives from the city employee unions and the three city pension plans. We held 21 meetings consulted with more than a dozen experts and heard from several city department directors. Task force members made 273 suggestions of which we selected 110 for the final Menu of Alternatives. Some alternatives were narrow like centralizing the management of finance legal and information technology personnel. Others were broad like working with Harris County to ensure that the citizens of Houston get their pro-rata share of benefits from the taxes they pay to Harris County. Similar to so many other cities counties and states across our nation rising pension and health care costs unpredictable revenues aging infrastructure high debt load and increasing costs for the delivery of city services threaten the city of Houstons ability to balance its budget and maintain its strong credit rating. The task force had grave concerns when it reviewed the 20 year financial forecast scenarios provided by the citys Finance Department.

The bottom line is clear: When the financial projections for the city include funding the full cost of future retirement obligations our city will not be able to balance its budget or maintain its credit without making some very painful choices. However not making the choices will lead to even greater pain.

The citys problems are structural rather than operational or managerial and were decades in the making. Further it is neither useful nor possible to blame any particular past mayor or administration any employee group or anyone in Austin. The city will be able to correct these structural problems by striking a fair balance between past promises about future retirement payments and the need to continue funding the day-to-day services that residents demand and expect. Done properly this balancing act will not undermine Houstons status as the fastest growing economy in the nation and will not cause potential residents and businesses to locate elsewhere. What are the choices? They include cutting services to reduce spending raising taxes and fees to generate more revenue or some fair combination of both. Even if the city reduces services and raises taxes the retirement expenses must be addressed. The single most important step will be to develop pension and benefits plans that provide reasonable long-term retirement security for city employees at a sustainable cost to our city. This requires the following:

1. The Texas Legislature must change the current law that gives control of the pension plans to the city employees and retirees who benefit from the funds. The Legislature needs to let the city not the beneficiaries manage the funds since the city has the responsibility for paying the benefits. This change will not affect the integrity of the funds assets.
2. The city must be given full access to the three pension funds detailed financial information including investments benefit structures individual payments and participant information so that the city can independently calculate benefits costs. Currently state law and the funds internal policies deny the city access to this information. Even the trustee appointed by the mayor is prohibited from giving financial information to the city Finance Department for analysis. The city must have such information in order to fully understand the benefits being promised and paid and in order to be able to make the appropriate changes to the benefit structures to achieve benefit levels that are sustainable. Our biggest disappointment in this process was our inability to obtain full access to the pension information. Without it we were unable to determine for example whether pension reductions necessary to build a sustainable retirement system could be limited to reductions for future employees or whether roll backs to current employees will be required.
3. Benefit schedules must be adjusted to eliminate spiking- the manipulation of benefits through the use of overtime and late career or temporary salary increases in the calculation of final average pay upon which the benefits are based. Eligibility to receive retirement benefits must be at reasonable ages with retirement benefits capped at a reasonable level. Incredibly under current plans some former classified employees retire after only 20 years of service without regard to age and others receive annual retirement benefits in excess of 100 percent of their preretirement base pay.
4. Pension security requires that the city fully fund the Actuarial Required Contribution every year based on a reasonable assumed discount rate without exception.
5. We must eliminate the option of granting additional retirement payments for employees who reach retirement age but continue to work.
6. In a fair and sensitive way we must change postretirement health care benefits which impose unreasonable costs.

None of these choices is easy and each one will attract opposition. But the alternative is financial disaster of the type some American states and cities are already enduring and in the near future many more will face but which Houston has avoided thus far. In her inauguration speech Mayor Parker committed to making the difficult but necessary changes required to keep Houston financially sustainable for the long term - even if those choices are unpopular. We are fortunate to have leaders committed to our future. Now is the time to act not to kick the can down the road or be swayed by emotional appeals from those with a personal interest in maintaining the status quo even if it imperils our city. We urge the citizens of Houston to demand that their state legislators remove the state from local pension issues so that our mayor and City Council can address these critical issues before it is too late. This article was submitted by all of the members of the city of Houstons Long-Term Financial Management Task Force who are not city employees: Michael Nichols chair; Barbara J. Paige; Gene Dewhurst; Fletcher Thorne-Thompson Jr.; Anne Clutterbuck; and Ana Sanchez Jacobs.