07 Oct How Much Will Proposition B Cost?
I have had a number of people ask me if I could tell how much it will cost the City if Proposition B passes. It is not an easy thing to sort out because the cost could vary significantly based on exactly how it would be implemented.
For example, the proposition would put police and fire on an equal footing in qualifying for education and training incentives. The City has estimated this will cost $10 million annually. But even The City’s own notes on its analysis indicate this is not much more than a guess since there is no way to know how many fire fighters would qualify for the benefit or take advantage of it.
But I have been able to pull together some data from various sources and I think the likely cost is coming into better focus. Based on this most recent information, I would put the cost of the Proposition B at something in $70-80 million range. If that is correct, it will be an increase in total compensation of 15-18%.
As you have probably heard, the City and its surrogates have been trumpeting from the roof tops that Proposition B represents a 25% pay increase and will cost $98 million annually. Some more recent estimates have said it is 32% and will cost “over $100 million” annually. These estimates are clearly exaggerated.
The most recent analysis was done by City Controller Chris Brown’s office. He has estimated the annual cost at $85 million. This, I think, represents the most comprehensive and objective analysis we have seen so far. I would take one relatively minor exception to Brown’s analysis. He includes an increased pension cost of $16 million, which he calculated at the current contribution rate of 33%. However, 19% of that 33% is going to pay off the unfunded liability. Only 14% is ongoing cost of the pension plan, at least, according to the actuaries’ estimates. So, 19% is not an increased expense, it just represents a faster repayment of the pension debt. If you use 14% for the increased pension cost, Brown’s estimate would have come in at about $76 million. [Click to review Controller’s Estimate]
My original guesstimate was based on PFM’s long-range financial study commissioned by the study. PFM calculated the all-in personnel costs at $124,000 for police and $104,000 for fire. So, if you brought fire up to exactly the same cost as police that would be about $20,000 per employee. That would be $80 million total or a 17.5% increase in total compensation costs. But, as Brown’s analysis shows, a large portion of the difference between police and fire is in the special category pay – for example, being bilingual. There are several of these categories, like investigative pay, that will be much smaller in the fire department than the police department. So, I my guess is that the $80 million was the upper limit on the cost.
The other indication that $70-80 million is in the right range is that Turner originally said that the finance department had estimated the cost at $238 million over three years – or $79 million annually. It was only after the finance department was sent back to massage the numbers that they came up with the higher estimate.
The City has never publicly disclosed the basis of its $98 million cost, but the Houston Chronicle obtained a worksheet through an Open Records request. [Click to see City Estimate] It estimates the pension cost at $22 million, which also, inappropriately in my opinion, includes the legacy cost of paying down the unfunded liability. If you make that adjustment alone, it gets the City’s estimate down to about $86 million.
So, all of these numbers seem to be converging on $70-80 million/15-18% range. I would suggest to voters that when they think about how they will vote on Proposition B, this is the range they should assume.
The fire fighters have gotten a 4% total raise since 2011. This would take them up to a 19%-22% raise in eight years, or about 2.5% annually. According to a story by Mike Morris, the police have gotten a 30% raise over the same period and are slated to receive another 9% in the next three years.
I am not crazy about the idea of writing compensation matters into the city charter. And catching the fire fighters up to a 2.5% annual raise in one jump is going to be a hit to the general fund budget that will take some significant belt-tightening to be sure. But the City’s general fund revenues are up by $80 million last year and the City seems to always find whatever money it needs for its pet projects, like the $200 million it is spending on the idiotic bus lanes on Post Oak.
I think it is entirely possible that Turner will lay off some fire fighters in retaliation as part of his on-going war on the fire fighters if Proposition B passes. But the calamitous predictions about massive layoffs, tax increases and other severe reductions in service are so much hyperbole.