More than 75 years ago, the Texas Legislature passed a statewide firemen’s retirement system, which was funded through firemen and insurance companies.
However, since 1975, the legislature has imposed a firefighters pension system controlled by beneficiaries.
As of July 2014, the fund’s board has decreed the city of Houston must pay more than $85 million per year into the fund.
Because the city has no right to change or to appeal the decree, the city sued, arguing the fund is unconstitutional.
In response, the fund successfully moved for summary judgment, prompting the city to appeal, court records show.
On Sept. 8 justices affirmed the trial court’s ruling, finding the city failed to establish the unconstitutionality of Texas Revised Civil Statute Article 6243e.2, which was enacted in 1997.
In its appellate brief, the city argued that by imposing a pension system without giving the city any local control or choice, the act violates the Texas Constitution.
“(The act) improperly delegates authority to a personally-interested Fund board, violating the constitutionally-required separation of powers,” the brief states.
“It improperly applies to the City only, violating the constitutional prohibition against special laws. And it improperly denies the City the option of creating its own pension system or joining a statewide one, violating the constitutionally- required ability to choose.”
Conversely, the fund maintained the legislature has express constitutional authority to determine how to compensate public employees.
In a reply brief, the city pointed out that ever-increasing pension obligations have become unsustainable, as businesses and cities throughout the nation have discovered.
“This City and others must prepare for the future now. Perhaps defined benefit plans made sense under the old model of shorter life spans and lower healthcare costs, but few entities now find defined benefit plans sustainable. Not even big oil,” the brief states.
“Like private businesses, which have largely jettisoned defined benefit pension systems, public entities like cities must consider other options or risk severe economic consequences.”
Following the ruling, the city issued a statement saying it still believes the state statute is unconstitutional because it allows the firefighters' pension fund to determine contribution levels and intends to seek further review.
City Attorney David Feldman represents the city.
Baker Botts attorney Travis Sales and Edmund LaCour Jr. represent the fund.
Appeals case No. 14-14-00437