Business

Steven Craig On Houston’s Pension Debt

Houston’s pension liabilities have been racing ahead of revenues for fifteen years. Getting the problem under control is likely to hurt city retirees, taxpayers, or both.

The City of Houston now owes well over $3 billion more on pensions than it’s bringing in in revenues. That deficit has nearly doubled in just the past five years, and it’s only expected to grow. Moody’s Investors Service, one of the nation’s top credit rating agencies, recently changed its outlook for Houston to negative — a warning the city needs to act fast to get the problem under control.

Steven Craig teaches public sector economics at the University of Houston. He joins Andrew Schneider on this week’s Bauer Business Focus.

 

INTERVIEW HIGHLIGHTS:

What are the political challenges to resolving the City of Houston’s pension debt problem?

“The city has promised employees a pension, and that’s part of the wage package.  … So if you reduce the pension, to have the same wage package, you would have to increase current wages. And the same thing for taxpayers — they’re not thinking that their taxes are going to go up and their services go down in the future. Both of those things are going to happen if we try to fix this hole that we’re in.”

 

How does this affect private sector workers and the companies that employ them?

“If I’m a firm in the City of Houston, and I’m having to compete with a firm that’s in Pasadena or Sugar Land or The Woodlands, and they don’t have to make these extra tax payments for which they’re getting no services but I do, then I’m behind. And either I will have higher prices and lose my customers or go out of business, or I’ll move my firm. Well, if all the firms exit, then where are the people going to go?”

 

How might the involvement of the Greater Houston Partnership help to find a solution?

“When the Partnership finally says that we’re having a problem, then hopefully that’ll generate the [political] will to fix it, because if we can get the city on a sustainable budget path, then the decline won’t happen. … [But] the time for us to intervene with…not too high economic damage is now.”

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Andrew Schneider

Andrew Schneider

Politics and Government Reporter

Andrew heads Houston Public Media’s coverage of national, state, and local elections. He also reports on major policy issues before the Texas Legislature and county and city governments across Greater Houston. Before taking up his current post, Andrew spent five years as Houston Public Media’s business reporter, covering the oil...

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