BACK TO INDEX

March 6, 2004, 3:00AM

Mayor wants election to 'opt out' of pension plan

Vested city workers blast move

By DAN FELDSTEIN, RON NISSIMOV and BILL MURPHY

Houston Mayor Bill White called Friday for a special May election to "opt out" of a state constitutional amendment that locks the city into generous pension payments. The proposal won strong support from City Council members but sparked anxiety among city employees.

The amendment, listed on last September's ballot as Proposition 15, says that no city can reduce or impair pension benefits that it has already promised to employees vested in their plans.

But Houston has recently discovered that funding predictions for its main pension plan were wildly off the mark. A consultant now predicts that the plan's assets will be $1.5 billion short of the expected payouts to retirees over the next 18 years. Taxpayers would have to make up the difference.

"It does the city no good to have an unfunded promise. That's a fraud," White said at a morning news conference.

"We don't want to save the budget on the backs of the employees," said Council member Ronald Green. "But if we can't stop the hemorrhaging, there will be no pension system -- to those who are vested or not."

The major cause of the funding shortfall, according to the consultant, is benefit improvements given in 2001. They give 90 percent of salary in retirement to anyone who works 25 years. With Social Security, those employees will make more in retirement than they earned while working.

Other perks include guaranteed 4 percent cost-of-living increases for retirees, though city employees have none, payment of full benefits to spouses after a retiree dies, and a lucrative deferred-retirement program.

When the administration of then-Mayor Lee Brown agreed to the improvements, an actuarial firm working for the pension board said the city would not have to pay more than 14 percent of its payroll to keep the plan funded.

Now the firm predicts the city will have to contribute 42 percent of payroll. White said that's impossible.

The constitutional amendment, pushed by pension boards across the state, gives cities only one chance to opt out of its mandates -- calling an election on May 15, 2004.

White and supportive Council members said the city didn't want to hurt employees, but must have flexibility to deal with the funding crisis.

Those words were unsettling for many city employees interviewed Friday.

"I had 40 phone calls this morning. One guy literally brought his family to our parking lot," said Kimbal Urrutia, director of the American Federation of State, County and Municipal Employees Local 1550.

"I feel like the employees are being railroaded," said one employee who asked not to be identified. "The city employees are being victimized for council's inability to regulate and control the pension board."

City Council, she said, liked to talk about cutting taxes, "but they only look at cutting employees' benefits for resolution."

Council's fiscal affairs committee held a special meeting to discuss the pension crisis Friday. They were joined by several other council members and unanimously passed a recommendation supporting White's decision to opt out.

The benefits given by the city's three main pensions -- municipal, police and fire -- would still be codified under state law and the pension boards would still have the right to negotiate with the city.

Harris County Tax Collector-Assessor Paul Bettencourt told council members that they would have to vote Wednesday on whether to hold the special election to meet a 62-day county deadline to put the issue on the ballot May 15, the only day that Proposition 15 allows.

He said he wholeheartedly backs White's recommendation.

"Thank you on behalf of taxpayers for taking this step to opt out," Bettencourt said. "Two billion dollars (the estimated unfunded mandate related to all three pension funds) is beyond the ability of taxpayers to absorb, in light of the fact they're already paying the highest taxes in the city's history."

Bettencourt criticized the Brown administration for not alerting citizens about the enormity of the problem.

"Quite frankly, a lot of this information has been public for quite some time," Bettencourt said. "The previous administration should have spoken up. I was so disappointed to find out the information was so widely known, except by the public."

Several Council members said they wanted full investigations of the role of the municipal pension board in drafting the pension changes in 1999, 2001 and 2003. They said they were concerned the board misled council members with inaccurate or incomplete actuarial reports.

"We (City Council) don't have the resources, staff or lawyers who can assist in monitoring this sort of thing," said Council member Shelley Sekula-Gibbs. "The resources are on the other side."

Council member Carol Alvarado added, "I think somebody ought to talk to the actuaries. What were they smoking?"

Others said the council itself should share some of the blame because it relied on actuarial reports prepared by Towers Perrin, which worked for the pension board.

"We should have hired an independent consultant, there's no way around that," said Council member Michael Berry.

Thomas Webb, another representative of Local 1550, told Council members that many city workers fear their pensions will be gutted.

"Our major concern is a clear line is being drawn between the citizens of this city and the employees," Webb said. "The citizens are starting to look at the employees as monsters who plan to break the city."

At his news conference, White said he expected voters to approve the opt-out. He made no predictions about what might happen to the pension after that.

First, he said, the pension fund needed a thorough and independent analysis. He said it will cost the city $2 million to $3 million to hold the election.

 Copyright 2004 Houston Chronicle

March 9, 2004, 10:23PM

AFL-CIO fighting to remain relevant

Associated Press

BAL HARBOUR, Fla. — Organized labor, facing setbacks in bargaining, membership and politics, is in the fight of its life to remain significant to workers.

Labor leaders meeting this week at a luxury seaside resort said Tuesday they must do a better job of organizing new workers to overcome steep losses in manufacturing and the current flood of white-collar jobs going overseas.

"The fact is that union membership hasn't kept up with job loss," AFL-CIO President John Sweeney said. "The jobs drain and the steady assault by the Bush administration has made a hard challenge harder. Manufacturing job losses in particular have socked not only our members but our industrial unions."

About 400,000 new members were organized last year, he said. But membership is at an all-time low, with just 12.9 percent of the work force belonging to unions last year.

That's down from 13.3 percent in 2002, according to the Labor Department. In the private sector alone, only 8.2 percent of workers were union members last year.

The nation's factories have lost 2.8 million jobs since President Bush took office in January 2001. Overall, after job gains in other fields are added in, total job losses in the U.S. economy have reached 2.2 million.

Meanwhile, labor is recovering from a brutal primary election that pitted unions against each other in their support of Dick Gephardt and Howard Dean, both of whom fizzled despite their labor credentials.

A dispute that union leaders labeled the most important campaign for the future of organized labor failed this month to produce a stellar contract on health care for grocery workers in California. The agreement requires employees to pay for health benefits for the first time and contains no raises. It also creates a two-tier system that provides lesser benefits to some workers.

At this week's meeting, "at the top of our list is the jobs crisis that has become a national disaster," Sweeney said.

Overseas outsourcing is becoming a hot issue this election year, with hiring at a near-standstill despite a surging economy. As many as 14 million white-collar jobs could be affected, either by being outsourced to other countries or hit by lower wage pressures, according to a study by the University of California, Berkeley.

John Podesta, the former Clinton White House chief of staff and a supporter of free trade agreements, briefed labor leaders.

"The reaction by the administration has been ... almost nothing other than, 'We're just going to extend the tax cuts,' " Podesta said.

California labor fight slams Kroger, Albertsons profits

News Services

NEW YORK — Top U.S. grocers Kroger and Albertsons said Tuesday that quarterly results were hit hard by a Southern California labor dispute and they expect a difficult 2004 because of competition led by Wal-Mart Stores and costs to revive operations.

Cincinnati-based Kroger, the No. 1 U.S. chain, said a slew of charges related to the protracted dispute in California and an asset write-down for money-losing stores led to a net loss of $337.4 million, or 45 cents a share, in its fiscal fourth quarter that ended Jan. 31. A year ago, the company posted net earnings of $381 million, or 50 cents a share.

Albertsons, the Boise, Idaho-based No. 2 industry player, said fourth-quarter profits fell 37 percent from a year earlier as the labor dispute stifled sales and pushed costs higher.

The five-month-long California dispute involved 60,000 workers who went on strike or were locked out at Kroger, Albertsons and Safeway stores as employers demanded cuts in employee health benefits. The dispute was resolved Feb. 29 when the United Food and Commercial Workers Union ratified a settlement.

Albertsons forecast that profits in the year ending next January will be lower than the $1.51 per share it posted for the year just ended. Analysts' average forecast is $1.62 a share, according to Reuters Research.

Kroger also said it anticipates lower earnings for the new year. Chief Executive Officer David Dillon said the grocer could not give a precise forecast because of uncertainties including the overall cost of the Southern California dispute and the time and investment needed to revive business at its Ralphs chain.

In other earnings:

• Nike, the world's largest shoe maker, said solid performance in the United States and Asia will push earnings for its latest quarter well above Wall Street estimates.

The Beaverton, Ore.-based company expects earnings for the third quarter that ended Feb. 29 of 71 cents to 74 cents a share, sharply above the average analyst estimate of 64 cents provided by Thomson One Analytics.

• Procter & Gamble, the biggest U.S. household goods maker, said profits this quarter will rise as much as 2 cents a share more than estimates by analysts, helped by sales of products such as heartburn drug Prilosec. The company also raised its annual dividend for the second time in a year and split its stock 2-for-1.

Profits are expected to climb to $1.06 a share for the third quarter, ending March 31, according to analysts surveyed by Thomson One.