1. Texas’ Retired Employees Obligations: Case Study – City of Houston
Bill King

2. Pension Plans Three Plans State law mandates defined-benefit plans
Police
Fire
All other Municipal Employees
State law mandates defined-benefit plans
Contributions to trust fund
City
Employee
Trust fund administration (also mandated by state law)

3. Categories of Obligations
Pension Plans
Underfunding
Pension Bonds
Retiree Health Benefits
Totally unfunded

4. Funding Adequacy Measuring adequacy of funding
Variables – actuarial & investment return assumptions
8.5% rate of return on investments
Actuarial Studies - Annually as June 30

5. City Contributions 2000 = $100 million 2010 = $233 million
More than Parks, Library, Health & Solid Waste Departments, combined
2020 projected = $505 Million
Will be about ½ of all property taxes collected by the City at that time

6. Unfunded Liability - Actuarial Calculation
2010 Actuarial Studies
$2.3 Billion
Pension Bonds
$.6 Billion
Total
$2.9 Billion

7. Unfunded Liability - Market Value Calculation
2010 Actuarial Studies
$3.8 Billion
Pension Bonds
$.6 Billion
Total
$4.4 Billion

8. Funding History

9. Unfunded Liability Continues to Grow

10. Retiree Health Benefits
Estimated Liability as of June 30, 2006
$3.0 Billion
Annual Cost
$21 Million
$59 Million

11. City’s “official” numbers
Perspective
City’s “official” numbers
Worst case
Per Capita
$2,521
$3,826
City’s Net Assets
($3.4 Billion)
1.7X
2.8X
City’s Annual Budget
($3 Billion)
1.9X
3.1X
City’s Total Bonded Debt
($13 Billion)
45%
68%
City’s Annual Property Tax Collections ($830 Million)
7.2X
11.2X

12. Not Just the City of Houston This is a Statewide Problem
Estimated Unfunded Liability Statewide as of June 30, 2010:
$42 Billion
Estimated Unfunded Liability Statewide if FMV of assets is used:
$68 Billion

13. Statewide Retiree Health Benefits
Estimated Liability as of 2010:
$73 Billion

14. Total Statewide Unfunded Liability for Pensions and Health Cost at 2010 Fair Market Value
Pension UAAL
$68 Billion
Pension Bonds
$2 Billion
Retiree Health Costs (OPEB)
$73 Billion
Total
$143 Billion

15. Statewide per Capita Debt
$5,700

16. www.BillKingHouston.com www.BillKingHouston.com