Court of Appeals Affirms Houston's Plan to Underfund Firefighters' Pension Fund

6/20/2019

HOUSTON (June 20, 2019) – The City of Houston has prevailed in an appellate court with its legal effort to underfund its yearly contributions to the Houston Firefighters’ Relief and Retirement Fund. Today, the Texas Court of Appeals, 14th Appellate District in Houston, affirmed a district court ruling that retained experimental revisions relating to funding made in the 2017 Texas Legislature to the firefighters’ pension statute.

“We are disappointed,” said Brett Besselman, the chairman of the HFRRF board of trustees. “This ruling, if upheld, would set the stage for perpetual shortchanging of firefighters’ retirement benefits. We will continue our legal challenges because Senate Bill 2190 violates the constitutional requirement that pension boards set actuarial assumptions to avoid local political tampering. We are compelled to pursue the rights provided in the Texas Constitution.”

The Texas legislature passed, and the Governor signed SB 2190 in the 85th legislative session. In addition to punitively cutting firefighter benefits and altering HFRRF’s funding mechanism, SB 2190 conflicts with the Texas Constitution by taking away the HFRRF board’s right to select the sound actuarial assumptions to be used by the Fund.

The Texas Constitution article XVI §67(f) grants the HFRRF board of trustees the exclusive authority to “select …an actuary and adopt sound actuarial assumptions to be used by the system.” SB 2190 infringes upon the HFRRF board’s constitutional right by setting out specific actuarial assumptions that HFRRF must follow. SB 2190 also sets up a procedure that allows the City to choose its own actuarial assumptions and force the board to “split the difference” on the City’s ultimate contribution rate even in situations where the board’s actuaries believe the City contribution must be higher. SB 2190 allows the City to game the pension to help the City balance a year to year budget, instead of producing long term security.

HFRRF was created by state statute and, since its founding in 1937, it has been administered by its board of trustees, as provided in the statute, who have adopted sound actuarial assumptions used by the Fund. HFRRF assets have grown steadily over the years. The market value of Fund assets in 1988 was approximately $468 million; today its assets are approximately $4.2 billion.