Dallas city officials have known for years about the pension crisis. Now, they face tough decisions about how to start building back two major funds. That’s according to Wednesday's city council budget briefing.
The shortfall in the public safety pension comes after the fund nearly went bankrupt in 2016 — after money that had been invested in luxury real estate did not turn a profit. At that time, the fund was at immediate risk of defaulting.
City staff says that’s different from the roughly $4 billion in unfunded liabilities for both the Police and Fire Pension Fund and the city’s employee retirement fund.
Unlike in 2016, the city has some time to rebuild the fund. But there is a deadline. The state’s Pension Review Board will be providing a final report ahead of the 2025 legislative session on the status of the pension system.
Worries about the pension system also come at a time when city officials are calling for more recruitment to both the Dallas Police Department and Dallas Fire Rescue. The proposed budget includes funding for nearly 300 new police officers, 100 more firefighters and millions more in overtime funds. The hiring of more officers
“We’ve been working hard…to hire more people, to have more people make contributions in the plan,” City Manager T.C. Broadnax said at Wednesday’s meeting.
Now, the city must figure out a way to start increasing their allocations to the pension fund — both legally and to retain officers from both departments.
“I think it’s going to take a combination of perhaps some infusion of cash,” Chief Financial Officer Jack Ireland said at Wednesday’s meeting. “…as well as increased annual contributions from the city, possibly from the employee. I don’t know.”
Ireland says the pension review board has hired a third-party actuary to start reviewing the pension system. The actuary will release a preliminary report as early as October or November of this year.
City officials say they have factored in other funding sources too.
“One of the things that we are considering as part of our debt analysis is we would issue $400 million in Pension Obligation Bonds to go toward this particular need,” Director of Budget and Management Services Janette Weedon said.
Currently, the Police and Fire Pension Fund has $3 billion in unfunded liability — the city’s employee retirement fund has another $1 billion. Essentially, the city does not have enough money to fully fund essential financial services for workers as they start to retire.
Like other types of bond programs, that would require voters to decide during an election — either held in May or November. Some council members say that feedback from members on the city’s bond taskforce feel rushed.
A November election would give staff more time to answer questions and get more understanding of the pension status, according to some Dallas officials.
“They feel very rushed and they have asked questions of staff that they have not gotten answers to,” District 12 Council Member Cara Mendelsohn said. “Slowing this down a little bit will allow us to have some accurate numbers for our pension.”
Along with Mendelsohn, District 7 Council Member Adam Bazaldua also voiced support for a later election.
“Why is it so such a need for us to be putting this on an election for May instead of in November?” Bazaldua asked.
Ireland says that an early bond approval will give immediate funds to finish and start new public projects. Staff also says a November election would be more expensive as well.
Broadnax did not believe that a delayed election would necessarily change the realities of the pension and debt issue — and says they are two sperate hurdles.
“What I don’t want to have people believe…is that we are going to put a whole city on hold, because we may have a pension issue to deal with,” Broadnax said. “We’ve been knowing that for five years…so nothing has changed other than the dollar amounts that we have to contribute annually.”
City officials will wait for the actuary’s report for more details and recommendations on how to move forward. They expect to have some information as early as November.
Got a tip? Email Nathan Collins at ncollins@kera.org. You can follow Nathan on Twitter @nathannotforyou.
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