Bill White's 9 Steps to Financial Freedom (#4)
We are referring, of course, to the massive unfunded liability at the Houston municipal employees pension fund*, which Mayor Bill White inherited from Lee Brown, made a lot of noise about early on (including the bizarre Hilton Americas asset transfer), then proceeded to ignore for most of his term.
The next mayor will inherit the problem, as we've been saying for quite some time. In today's Chronicle, John Diamond (a Fellow at the Baker Institute) decided to call attention to the problem**:
It's no secret that Houston has a major problem with its pension funds. Liabilities -- or promised benefits -- are much larger than the assets that have been set aside to fund them in the future. The city reports that as of July 1, 2008, the ratio of assets to liabilities is 96 percent for the firefighters' pension, 82 percent for the police officers' pension and 70 percent for the municipal employees' pension. In other words, only 96, 82 and 70 percent of promised benefits, respectively, could be funded by accumulated assets. The unfunded liability -- promised benefits that the city has not set aside enough funds to pay in the future -- for all three pensions is equal to $1.7 billion, according to the city.
However, the problem is much worse than the current city government appears willing to admit.
We would suggest that it is a secret, at least an open one, since there's just not that much reporting or editorializing on the matter (or, to be fair, interest in the same). We do agree that the problem is worse than current financial reports suggest, mainly because those reports are out of date and the situation continues to deteriorate.
Perhaps the local media covering the mayor's race will ask the current crop of (me too!) mayoral candidates how they plan on dealing with the massive unfunded liabilities in the pension plans (psst... ask about other benefits too). And perhaps the media covering the race for a U.S. Senate seat that isn't yet open will also ask about the problem.
* The other city funds do not have nearly the unfunded liablility.
** We're not sure why this long-standing problem has suddenly become of interest to academic types or the folks who edit the Chron editorial pages, but we're pleased to see the scrutiny.