Archive for June 9th, 2017

Hands down this is the dumbest thing that was said yesterday.

White House principal deputy press secretary Sarah Huckabee Sanders said:

“No, I can definitely say the president is not a liar.”

The whole world knows he’s one of the biggest liars in history. So dumb!

You know the Donald Trump team is reeling when the best they can do is send Corey Lewandowski out to do their spinning. This fella has no cred. They are hurting for sure.

I like this tweet from yesterday:

Evan liked

Kevin M. Kruse‏Verified account@KevinMKruse 13h13 hours ago


Odd to hear Republican senators lecture Jim Comey on how he should’ve stood up to Trump earlier and in more forceful tones.

You can say that again.  Ain’t it the truth!

On a related matter, I thought Sen. John McCain was going to pull a Sen. Birney from “The Seduction of Joe Tynan” yesterday.

Here is from Rebecca Elliott’s front page Chron story on the H-Town City Council fixing to vote on joining the SB 4 lawsuit:

Harris County Republican Party Chair Paul Simpson disagreed.

“It’s improper for the mayor or the city to pander to the Democrat base and oppose a very reasonable law – a law that just asks law enforcement officials to enforce the law,” he said.

Here is all of Rebecca’s article: http://www.houstonchronicle.com/news/politics/houston/article/Turner-calls-for-City-Council-vote-on-SB4-lawsuit-11206869.php.

Excuse me? Pandering? What is the upcoming special legislative session all about anyway? Pandering? Come on!

Rebecca Elliott polled city council members and here is what she has:

How they will likely vote

How members of City Council say they likely will vote:

Mayor Sylvester Turner: yes

District A (Brenda Stardig): declined to comment

District B (Jerry Davis): did not respond

District C (Ellen Cohen): yes

District D (Dwight Boykins): yes

District E (Dave Martin): no

District F (Steve Le): no

District G (Greg Travis): no

District H (Karla Cisneros): yes

District I (Robert Gallegos): yes

District J (Mike Laster): declined to comment

District K (Larry Green): yes

At large 1 (Mike Knox): no

At large 2 (David Robinson): yes

At large 3 (Michael Kubosh): no

At large 4 (Amanda Edwards): yes

At large 5 (Jack Christie): plans to abstain

Remember a day or so ago when the Mayor floated a trial balloon of sorts saying he might issue the pension obligation bonds before getting voter approval. I guess the trial balloon was found guilty. Here is from Mike Morris of the Chron:

Mayor Sylvester Turner will ask Houstonians to vote on the pension bonds that are central to his reform deal after all, using a Thursday morning tweet to clarify an equivocal stance he had taken on the topic the day before.

The Legislature added that referendum requirement in adopting Turner’s landmark pension reform legislation this spring. The bill, however, would let the city issue the bonds without a vote if City Council approves agreements with the pension funds that will receive the $1 billion in bond proceeds before July 1, the effective date of the legislation.

Turner had said he thought it was “unlikely” that he would sidestep the referendum, but did say he intended to bring those agreements to council in two weeks.

Early Thursday, he tweeted a more definitive statement: “The city will proceed with a vote on #pension obligation bonds in November,” signing the tweet with his initials to indicate he, and not a staffer, was the author.

Yeah, that probably wasn’t a good idea.

Bill King just sent out his take of the pension bill. Here it is so enjoy:

As you have probably seen in media accounts, the Legislature has passed a bill making very substantial changes to the City of Houston’s pension systems. The bill as passed was 260 pages and mind-numbingly complex. When added to the existing statutory language, the Houston pension statutes will now run over 90,000 words, which in and of itself is absurd.

The bill follows the general outline of what Turner proposed last October, but as the result of lobbying by the business community and grass roots activists, the Legislature made significant changes to Turner’s original proposal. This is the first time that groups representing the taxpayers showed up in Austin to be heard on pension legislation. In the past, local elected officials and the employee groups would make a deal and the Legislature would rubber stamp it. That is not what happened this time. 

Let me begin by emphasizing that while the final bill moves us in the direction of solving the City’s pension problems it is far from a permanent solution. Many of the City’s claims about the virtues, like it will allow the City to pay off the pension debt in 30 years or it will save a million dollars a day, are patently false. And other than the $1 billion in borrowed money, the bill actually allows the City put less money in the plans over the next 5-6 years. Hardly a way to reduce the debt. 

So, the City will face another pension crisis. The timing of that crisis depends in large measure on how the investments in the pension plans perform over the next few years. If they continue to perform as they have in recent years (10-year average = 5.6%), that crisis will be sooner rather than later.

A detailed review of the bill is impossible here. For those of you who want to take a deep dive, you can review the bill [here]. But here is the Cliff Notes version:

1.  Pension Cost Reductions for Infusion of Bond Proceeds - The only part of the new legislation that is likely to make any real difference in the City’s pension costs and debt are benefit reductions and increases to the employee contribution in the amount of about 15% or $2.6 billion. It is important to emphasize that this reduction in pension liabilities is estimated because the actual amount of the savings is dependent on factors in the future, like interest rates. Nonetheless, the savings are substantial and will bend the cost curve down in the future.

 The benefits reductions fall into two categories.

The police and municipal plans agreed to about $1.7 billion in cuts in exchange for the City’s agreement to infuse $1 billion from the issuance of pension bonds. Some of you will recall that in the last mayoral campaign this was one of the scenarios I suggested as a tool to reduce the unfunded liability. At the time, Turner was adamantly opposed, arguing, “You can’t solve debt with more debt.” Fortunately, Turner changed his view.

There are also benefit cuts and contribution increases totaling about $900 million for the fire fighters pension plan. I have long criticized the fire fighters for being slow to accept that their benefit structure was unsustainable, but the changes to the fire fighter plan are deeply troubling to me. Unlike the police and municipal plans, the fire fighters did not agree to the cuts in their benefits and will not get any bond money. 

Also, the cuts to the fire fighters’ benefits were dramatically more severe than those agreed to by the police and municipal plans. The average benefit cut per member to the fire fighter benefits under Turner’s plan is about $150,000 compared to about $90,000 for police and $28,000 for municipal.

There is no question that the benefits for fire fighters are the most generous benefits of the three plans and were badly in need of reform. However, this plan does something that every candidate for mayor in 2015, including Turner, promised to never do – take away benefits that had been previously earned by our employees. How many times did you hear all of us who ran for mayor declare “a deal is a deal” and promise that earned benefits would never, absent an agreement, be cut. We, as a City, have now done just that and in doing so have clearly broken our word to the current and retired fire fighters. That is not something that should be taken lightly or celebrated.

2.  Voter Approval of Pension Bonds. One reform that was won by the business community and grass roots groups was the requirement that any new pension bonds must be approved by voters. When the Legislature allowed cities to issue pension bonds in 2003, the legislation was silent on whether voter approval was required. The Attorney General’s office has interpreted that silence (incorrectly I believe) to mean that voter approval is not required. As a result, the City has already issued about $600 million in pension bonds without getting voter approval.

That will no longer be the case. The bill now requires the City to obtain voter approval before issuing any new bonds. I have long said that pension bonds can be a tool to help manage our pension problems. But like any tool, they can be used properly or they can be misused. Voter approval is an important check to make sure any future pension bonds are not misused.

You may recall that when taxpayer groups first insisted on a voting requirement on bonds, Turner declared it was a poison bill that would kill the bill. But apparently after Turner saw polling that nearly 80% of Houstonians thought they should vote on any new bonds, the provision became less toxic.

3.  The “Corridor.” The third major component of the bill is a complex mechanism that is intended to limit the amount that the City will contribute to the pension plans in the future as a percentage of payroll, which has come to be known as the “corridor.” As nearly as I have been able to determine, no other entity, public or private, anywhere in the country, has ever implemented anything like the corridor. It is a completely untested and experimental model.

 It is also hideously complex and the provisions are ambiguous and in some cases internally inconsistent. That, in my experience is a recipe for litigation and I suspect you will see plenty of that in the future. You will also see the administrative costs for the plans, which are already too high, rise even more.

The real flaw in the corridor mechanism however, assuming it is actually enforced, is that it primarily relies on future increases to employee contributions if the City’s contribution rises above the limit. It is highly likely this will occur because the plans are unlikely to achieve the 7% investment target over the long run. And a small miss on the investment return equates to very large increases in the employees’ contribution. These increases will be so large at some point in the future it will not be feasible to enforce the corridor. That is the event that will likely precipitate Houston’s next pension crisis.

4.  Phasing out Defined Benefit Plans. The biggest disappointment with the bill is that there is no immediate phasing out of the defined benefit model. The bill does include a safety net of sorts that provides that if any of the plans fall below a 65% funded level, they must move all new employees to a cash balance plan. Cash balance plans have some elements of both defined benefit and defined contribution plans. Unfortunately, the bill also includes extraordinarily long grace periods (four years for police and fire and ten years for municipal) which will likely make the provisions meaningless for all practical purposes. In all likelihood, the City will see its next pension crisis long before the expiration of those grace periods.

 Nonetheless, the inclusion of this safety net is an important symbolic victory, because it is a concession that phasing out defined benefit plans is the real solution to the City’s pension problems. 

 5.  The Constitutional Question. There is one issue outstanding that may make this entire effort for naught. There is a provision in the Texas Constitution that grants the right to set actuarial assumptions to the pension boards. Of course, the entire point of the corridor is to force the pension boards to share that power with the City and the bill establishes certain limitations on the pension boards’ discretion in setting the assumptions. While there is certainly an argument to be made that the pension boards should not be exclusively vested with the power to set assumptions, that seems to be what the State Constitution provides. The fire fighter pension board has already filed suit to declare the legislation unconstitutional.

The other boards currently have no plans to sue, but may find they are forced to do so to avoid liability from their members. Also, it is possible that any member of the plans could bring such a suit. Of course, that litigation will take time to resolve. If the City implements the plan and then it is declared unconstitutional several years from now, we will have a real mess on our hands.

Notwithstanding Turner’s public confidence that the City will prevail in this litigation, the City legal staff was manic during the negotiations to get the fire fighter board to agree not to sue.  I make no prediction about the outcome on the merits, but certainly on its face, the legislation appears to violate the constitution.

There is also another practical effect of the fire fighters’ lawsuit. The Texas Attorney General must approve the issuance of any bonds by local governmental entities. Generally, their policy is to not sign off on any bonds when there is any pending litigation. Whether the Attorney General’s office would find this litigation affects the issuance of the pension bonds is an open question. But generally, that office has been pretty conservative in making such determinations.

6.  Conclusion. Shortly after Bill White was elected in 2003, he received the bombshell that the pension plans were underfunded by over $2 billion. White undertook a series of reforms that reduced benefits and he issued pension bonds to shore up the plans. But he left the defined benefit model in place. A dozen years later, our pension debt had tripled.

White’s reforms unquestionably reduced the future costs of the pension plans, but ultimately his incremental approach proved not to be a permanent solution. Such is the case with this plan. It too reduces the pension costs immediately, but instead of biting the bullet and beginning the phase-out of defined benefit plans, it relies on an untested and what will be proven to be unworkable mechanism to do what moving to defined contribution plans would have accomplished without the cost, complexity, litigation and uncertainty of this plan.  And as a result, Houston taxpayers and employees will suffer in the long run.

Commentary received this response from my take yesterday:

Mayor Turner can follow the plain language of the recently passed pension bill and still issue the bonds. Senator Huffman and others can complain all they want but they left the language open to this happening, more than a few in Austin mentioning it since the change was added. If they really wanted the preclude the mayor from moving forward, they could have easily changed a couple of words but they did not and given the collective experience of those reviewing the bill in the House and Senate, it is not believable to say it is illegal.

As pointed out previously, Houston is a far more welcoming city than most that immigrants can move to and all these changes in federal and state law do not force the city to change an awful lot to comply. The well meaning Dreamers can mix metaphors, selectively toss county events into city timetables, and otherwise distort the reality of the situation but by and large, if you live in Houston and stay out of trouble, you are left alone regarding your immigration status. Poverty is too complex to pin the blame on city leaders as is how full county and state jails/prisons are with poor people that happen to be one of various minority groups, a lot of that is currently being changed at the county level in the bail reform lawsuit of which the city has no say.

That some groups are statistically more likely to commit certain crimes or act in a manner that endangers them in their dealings with armed police is a given and needs to be addressed by communities at least as much as we expect police to confront people committing felonies or when those people are in a crisis to endanger the public. This is a golden opportunity for Latinos given both HCSO and HPD are now led by Latinos who have expressed a desire to improve community relations while state and federal lawmakers are moving in the opposite direction. Direct your wrath at those who are trying to hurt you, not those trying to help. Turner need not jump into the lawsuit to file a brief in support of the lawsuit either, letting emotions dictate how you react seems to be a bad choice for you as you are likely to alienate those who have fought for you already. – Steve Houston

We had an 8-2 roadie. We are 13 up. Now we have a 9-game homie that includes the Angels, Arlington, and the Red Sox. Let’s hope Dallas Keuchel gets well soon.

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