Dallas’ elected officials must have a plan on how to deal with billions in unfunded liability in the city’s police and fire pension by the end of 2024. Mayor Pro Tem Tennell Atkins, who chairs the city's Ad Hoc Committee on Pensions, wants a plan a lot faster than that.
Atkins directed the committee during Thursday’s meeting to brainstorm options and have a game plan for the fund by the end of the year.
Dallas Police and Fire pension officials say right now, the system that supports thousands of the city’s active and retired members, is only 41% funded. Assuming current projections are met every year it could be over 60 years before the system is fully funded, according to pension executives.
The issue isn’t new. In fact, city officials have known for years of the pension fund’s future hurdles. But city officials are close to their deadline for coming up with a resolution.
Before 2025, the pension board must present a plan to state pension regulators that details how the system will be funded in a “period of less than 30 years,” and take recommendations by an independent actuary.
Atkins says he’s disappointed that pension officials have known for years of the mounting problem and have no devised a plan to bail the fund out. And he says he wants a plan nearly a year sooner.
“I am sitting here as the chair and I have to come up with a plan in 12 months,” Atkins said during Thursday’s meeting. “We’re going to have some kind of plan before the end of the year, because six years is too long...for someone to have that doubt out there.”
The pension fund has $3 billion of unfunded liability — and right now, the city won’t be able to adjust the benefits for cost of living or inflation until October 1, 2073.
The Texas Legislature passed new laws in 2017 that essentially changed how the Dallas pension system works. The bill cut employee benefits and required more out-of-pocket contributions. It also changed how the city could increase benefits.
While members of the pension committee called on staff to come up with a plan quickly, some officials say they don’t believe city staff has been “sitting back” while issues remain in the pension fund.
“We’ve been doing things that would shore up the funds, that would improve the funds assets and contributions through pay and number of officers,” Chief Financial Officer Jack Ireland said. “So we needed some time…I don’t think we have sat back.”
Pension board officials say they are shuffling their investments as well. Kelly Gottschalk is the executive director of the police and fire pension system. She says the portfolio is partly made up of private assets.
“The real estate and private equity that we have, the goal is to liquidate what we have remaining,” Gottschalk said. “And then buy new performing assets.”
Part of the reason the pension fund was plunged into disarray centers around claims of mismanagement and investment in risky real estate. In 2016 the fund nearly went bankrupt after luxury real estate investment didn’t turn a profit. Officials said at the time that the fund was at immediate risk of defaulting.
The 2017 legislation was meant to ensure that Dallas’ police officers and fire personnel still had the pension system as an option.
Atkins directed District 9 Council Member Paula Blackmon to spearhead the effort to draft a plan, before the committee meets with the pension board’s actuary in early November. She says that coming up with a plan is viable — it’s the execution that will take work.
“People have been looking at this for a while so nothing is a surprise,” Blackmon told KERA. “It’s just working through the problem to seek solutions, then getting it done.”
The pension committee has a handful of meetings left before the year is over. The next gathering will be to hear from the police and fire pension actuary – who is expected to give an estimate of what the city needs to pay to comply with state laws.
Got a tip? Email Nathan Collins at ncollins@kera.org. You can follow Nathan on Twitter @nathannotforyou.
KERA News is made possible through the generosity of our members. If you find this reporting valuable, consider making a tax-deductible gifttoday. Thank you.
