Bill King continues his series on Houston’s municipal pension problems with his proposed long-term fix:
The only permanent fix is to scrap defined-benefit plans in favor of defined-contribution plans. With defined-contribution plans we will always know exactly what the plans cost because they have to be 100 percent funded each year. There are no unfunded liabilities with defined-contribution plans.
But while converting to defined-contribution plans means that we will have stopped digging, it does not get us out of the current hole. It troubles me to hear suggestions that we address the current unfunded liability by retroactively changing benefits which public employees have already earned. To me a deal is a deal. While we may not like the deal our elected officials made for us, we elected them and we should stand by their commitments.
That will mean that the taxpayers, for many years, will be making contributions to wind down the existing defined-benefit plans. It will require sacrifices in city services and higher taxes than would otherwise be necessary. But at least the number will be finite, unlike in our current predicament.
This is an eminently sensible — and fair — proposal. Still, we wonder along with King if political leaders will have the courage to make the changes sooner than later, or will continue punting (like Bill White for Texas) until the problem becomes a crisis?