Happy New Year! I hope you and your family enjoyed a successful and happy holiday season. Like me, you have made your resolutions and are looking forward to a new beginning and a fresh perspective in 2022.
As 2021 ended, I was excited to join local organizations to spread cheer to local families with children. We gave away bikes, food and joined an important partnership to promote COVID-19 vaccines as cases continue to rise in our City.
Last year, Houston faced several challenges, but we also demonstrated our strength and resilience as a community. One example is the state of the city’s finances.
After becoming mayor, one of my priorities was to work on pension reform. Houstonians came together to lift a significant barrier to progress in our city. As I informed the city council at the last city council meeting of 2021, the unfunded liability for all three pensions, fire, police, and municipal, which has challenged our Houston since 2001, dropped from what would have been $8.2 billion without historic pension reform to $1.49 billion.
Shortly after our historic pension reform, we began work on another recommendation from the PFM report – Other Post-Employment Benefits (OPEB). OPEB are subsidies that help pay for retirees and their dependents’ health insurance. When I took office, the liability was estimated at $2.2 billion and was expected to grow to over $9 billion over the next 30 years if we did nothing.
In 2019, Segal Consulting went before the BFA committee to discuss the recommendations on how to reduce the expected growth. The Human Resources Department, in collaboration with our Finance and Legal Department, along with Segal Consulting, started work on projecting these recommendations and how best to implement them. The new projected cost over the next 30 years is now estimated at $4.3 billion with these plan changes.
Changes will go into effect January 1, 2022, and:
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There will be no changes for current retirees.
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Current employees, depending on their years of service and age, may see a reduction in the subsidies offered on retirement health insurance.
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New employees hired on or after January 1, 2022, will receive no subsidies.
All future retirees with the City’s health care coverage at the time of retirement will be able to continue coverage. Still, the costs of those coverages will be determined based on their years of service and age as of January 1, 2022.
I want to thank everyone for their hard work and trust in this endeavor, lifting another significant barrier to progress in our City.
