Houston Loses Battle to Unilaterally Restructure Firefighter Pensions

A Texas appellate court has denied the appeal of the City of Houston in its efforts to unilaterally restructure its firefighter pension system to save money.

The City of Houston filed suit against the Houston Firefighters’ Relief and Retirement Fund in state court back in 2014 claiming that pension costs were driving it toward bankruptcy. It sought a declaratory judgment that the present pension arrangement was unconstitutional.

According to its complaint, the city argued “Houston cannot and will not ignore the lessons to be learned from the recent Detroit bankruptcy and the financial difficulties related to pension obligations being experienced by municipalities throughout the country.”

The city argued that the pension board included a majority of firefighters whose self-interests worked against the interests of the taxpayers, representing an unconstitutional delegation of power away from the city. The decisions made by the board essentially tied the city’s hands financially, burdening it with debt it could not sustain.

In May of 2014, a Harris County Court sided with the pension fund, prompting the city’s appeal to the 14^th Court of Appeals. In a 27-page ruling issued last Thursday, the Court of Appeals concluded that the act creating the pension fund did not unconstitutionally delegate power away from the city.

In addressing the heart of the city’s argument, the court found:

• The City’s overriding complaint regarding the Fund is that the City has no control over the amount of its contributions and there are no guidelines for the contributions, thus subjecting the City to unlimited contributions at the will of the Board.
• We disagree.
• The City’s contributions are set by the Act and not arbitrarily decided by the Board.
• In particular, the City’s contributions are related to member salaries and contributions.
• Each member in active service shall contribute an amount equal to 8.35% of the member’s salary at the time of the contribution and as of July 1, 2004, an amount equal to 9% of the member’s salary at the time of contribution.
• The Act then prescribes the City’s contributions…
• As the Fund asserts, the City’s contribution rate each year depends on the results of an actuarial valuation performed according to certain criteria and covering a three-year period.
• Thus, we disagree that the Act fails to set reasonable standards for calculating the City’s contributions.
• We characterize the City’s complaint more as not liking, or having control over, those standards, but that complaint is not a basis for declaring the Act an unconstitutional delegation of power.

Here is a copy of the ruling: city-of-houston-v-houston-firefighter-relief-and-retirement

Here is some perspective for those who don’t like reading cases.