Pension Rule Changes Aided Top City Officials

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Pension Rule Changes Aided Top City Officials

By Dan Feldstein, the Houston Chronicle

March 3, 2004

The official in charge of negotiating changes in the city's pensions under Mayor Lee Brown nearly tripled his own retirement benefit through changes approved during Brown's six years in office.

Under the pension rules as they existed in 1998, Brown's first year in office, chief administrative officer Al Haines would have earned an estimated $36,000 in retirement for the nearly 11 years he served under former Mayors Kathy Whitmire and Brown.

Under the rules in effect when Brown left office, Haines will get an estimated $103,000 per year.

Likewise, former City Attorney Anthony Hall, in charge of the city's lobbyists who dealt with legislation in Austin that authorized the pension changes, got a 79 percent increase. His estimated benefit, if he serves six years as chief administrative officer for Mayor Bill White, will be at least $131,000 per year, up from $73,000 per year under the pre-Brown rules.

Haines, who is now in Iraq helping local officials rebuild their governments, could not be reached by e-mail for comment.

Hall said it was a "fair question" to observe that the officials supervising pension changes were themselves vested in the pension system. But, he said, that would be true of any city employee or elected official, and someone has to do the job.

However, only department heads and the chief administrative officer got extra benefits that doubled their payouts.

Houston's main pension fund is facing a $1.5 billion shortfall over the next 18 years. That means projected assets are $1.5 billion short of projected payouts to retirees.

The latest estimates are an enormous change from 2001, when the largest benefit changes were made. City officials point out that Towers Perrin, a consulting firm working for the pension board, said at the time that the changes were affordable. But its calculations changed late last year.

To be in technical compliance with fund rules, under current projections, the city would have to increase taxpayer contributions to the fund next year by $97 million. The contribution this year is $55 million.

The pension fund's professional staff and Towers Perrin have not commented publicly. But others have.

"I am going to ask that we debar Towers Perrin from ever doing business with the city. This is a big mistake of theirs," said Council member Mark Goldberg.

"The pension board has been very abusive of their authority and tried to act as a secret organization," he said.

In a previous e-mail interview, Haines said most pension changes during the Brown administration were made to compensate for extremely low salaries earned by city workers.

The system now allows many employees to earn more in retirement than they did while working, when Social Security benefits are also included. The longest-serving employees potentially can retire as millionaires thanks to a deferred-retirement program.

The pension system's governing board, with employees and retirees making up a majority, has always pushed for better benefits. The city administration reviews the proposals and, if it concurs, asks the Legislature for approval to grant them.

In 1999, the board created a special pension category for all city department heads, including the chief administrative officer and the director of the pension system. It doubled the percentage of income each would get in retirement for each year of service as a city executive.

Then, in 2001, the percentages for years of service were significantly raised for all employees, meaning the executives got not only the higher percentage, but doubled it.

The explanation for the doubling of executive rates was that with term limits, city department heads appointed by the mayor couldn't expect to serve more than six years. So, to recruit the best people, an accelerated pension was needed.

The change was made retroactive for anyone still serving as an executive. That meant Haines got the double credit for being Whitmire's chief of finance and administration, as well as for his service to Brown.

As calculated by the Chronicle, Haines will get 71.3 percent of his final salary of $145,000 for his 10.9 years with the city. Had the rules stayed as they were in 1998, he would be getting just under 25 percent.

Hall served as a member of City Council for 10 years in the 1980s. He gets only one year's retirement credit for each of those years, as does any mayor or council member for his or her years of service. But Hall's six years with Brown and a projected six years with White raise his pension from 50.5 percent to 90 percent, the city's pension cap, of his final salary.

The Chronicle figured Hall's pension based on no raise throughout his term with White, leaving his salary at about $145,000. All calculations were checked with officials of the city's human resources department.

Although he supervised the city's lobbyists, Hall said, "pension is just one of 100 issues" the lobbyists were dealing with. "Al (Haines) was the person who was in charge of dealing with the pension funds."