Mayor Backs Rollback of Pension Reforms; Experts Cite Fiscal Risks

Mayor John Whitmire has sparked concern among experts because of his support for bills that roll back reforms to Houston’s police and firefighters pensions, with some calling this move ill-considered and even “stupid”. The proposal is happening 8 years after the Legislature passed reforms for Houston’s employees pensions, which at this moment, are underfunded by $8.2 billion. Gov. Abbott’s desk is waiting for the House Bill 2688 to be signed, passed in both chambers almost unanimously, this bill leaves most reforms intact yet reverse key changes like letting police officers and firefighters retire after 20 years of service, regardless of their age. Past reforms closed this postponed retirement option plan, or DROP, to officers hired after 2004 and to firefighters hired after 2017, as reported by the Houston Chronicle.

“They lowered the retirement age, which is an inducement to retire, and then they add DROP, which is an inducement to stay on. That’s stupid. It’s cross-purposes,” said Craig Mason, a retired actuary who worked as a pension consultant, “This is just mind-boggling to me. They’re going backwards.”

Supporters harshly argue that this measure is because of the countdown in both departments, insisting with the “neutral costs” of the reform, mentioning actuarial projections submitted by the pension funds and deemed “reasonable” by the state Pension Review Board. “I wouldn’t have passed this legislation if it walked back the important reforms from 2017, or put taxpayers, the pension plans and the city at risk by creating new unfunded liability,” said state Sen. Joan Huffman.

Mayor John Whitmire since taking office, has also implemented substantial pay raises for public safety workers, despite Houston’s ongoing budget challenges. The measure follows reforms from 2017 that altered DROP significantly, and while the current structure limits DROP account returns to 65% of investment gains, critics like Josh McGee, a key figure in the 2017 reforms, warn that assuming long-term cost neutrality based on a 7% return is risky and could result in increased financial obligations for the city.

Finance experts and former city officials have voiced concerns about both the assumptions behind the bill and the lack of public scrutiny. John Diamond from Rice University noted that while the new structure may be harder to abuse, the risk remains that DROP benefits could expand further. Melissa Dubowski, the city’s finance director, acknowledged that cost neutrality depends on maintaining a 7% return, and that the bill includes a “corridor” safeguard from 2017 that requires negotiations if costs exceed set limits. However, former finance director Kelly Dowe argued this safeguard lacks enforceability, warning that the city could again fall into financial trouble if returns dip and no consensus is reached on necessary cuts.

Critics also emphasized a troubling lack of transparency and comprehensive analysis behind HB 2688. The city’s pension liability was significantly reduced after the 2017 reforms—from $8.2 billion to $1.8 billion—yet experts say the current process mirrors the missteps that led to Houston’s pension crisis in the late 1990s and early 2000s.