Dallas needs to increase its annual contributions into the Police and Fire Pension Fund, consider selling city-owned real estate and keep employee benefits flat to meet a state-required funding deadline.
That’s what city staff recommended to council members during Thursday’s Ad Hoc Committee on Pensions meeting, to stabilize the ailing retirement fund.
The plan comes after risky real estate investments and a “run on the bank” nearly led to the system defaulting. Worried about the pension fund's stability, participants started making large withdrawals from related accounts starting in 2015.
In 2017 the state legislature passed a bill to help fix the fund and reduced $1 billion of its unfunded liabilities.
City officials say the legislation wasn’t meant to be a long-term plan and requires the city to come up with their own solution — which the state’s pension board will review. And that deadline is coming up at the end of the year.
But during Thursday’s meeting, at least one council member warned that not increasing sworn-employee’s benefits — which is only allowed when the system is 70% funded — could hinder public safety recruitment and retention strategies. And they warned against increasing non-sworn employee benefits without addressing police and fire as well.
While the city is also facing a similar deadline — and a vote by Dallas residents — on how to stabilize the city’s non-sworn Employee Retirement Fund, officials say there’s a different set of requirements for that system.
Ultimately, nearly all council members at Thursday’s meeting said the goal is to stabilize the fund — and ensure this issue never happens again.
“I want a solid governance plan, for each of the funds,” District 9 Council Member Paula Blackmon said during the meeting. “People will be held accountable, because this is not going to happen again…people need to be put on notice.”
Recommendations
Over 10,000 people rely on the Dallas Police and Fire Pension system. Just over half of those are active employees and the other half are retirees or beneficiaries, according to city staff.
Staff’s recommendations come after an independent actuary and a focus group — comprised of financial experts — also came up with recommendations.
Cheiron, the actuary selected by the state’s Pension Review Board, recommended the city move from a fixed rate contribution to an “actuarially determined” one instead. They also recommended trying to accommodate a cost of living adjustment sooner, even though the increase is only allowed when the system is 70% funded.
The study group recommended the city make additional fixed contributions on top of its current annual investments. After a phase in period, the group recommended the city moved to an actuarial determined contribution — similar to Cheiron’s recommendation.
And the group also said infusing the fund with a lump sum of cash could be a way to reach the 70% funding goal faster. That money could come from the city’s real estate portfolio, according to officials.
And for the most part, city staff agrees with recommendations from both groups. That goes for trying to raise funds to invest in the pension.
“We believe that we should evaluate and identify opportunities where we could potentially monetize some assets that would allow us to make a cash infusion into the fund,” Chief Financial Officer Jack Ireland told council members on Thursday. “That would lower future contributions, or it would also allow us to reach that 70% funding level much sooner.”
Ireland says that would also allow the city to increase employee benefits.
‘Dangerous rhetoric’
Most council members seemed to agree with what staff laid out — aside from some comments about not receiving the briefing materials in time to review them before the meeting.
Council members were briefed on both the Police and Fire Pension Fund and the Employee Retirement Fund. That fund serves the city’s non-sworn employees.
Staff laid out two timelines that address the Employee Retirement Fund changes. Those changes require amending city code and voter approval — which means calling an election for either May or November.
The two systems have two separate funding plans, deadlines and goals. And while there will be no changes to the current Employee Retirement Fund benefits — that fund does currently allow for cost of living adjustments.
But during the meeting, District 12 Council Member Cara Mendelsohn — who chairs the city’s Public Safety Committee — said if one group is eligible for an increase, the other group should get it as well.
“They might be governed differently…but how in the world do you think its okay to have a [cost of living adjustment] for somebody that’s non-sworn sitting right across from somebody who has a badge on,” Mendelsohn said during the meeting.
Mendelsohn has previously said the lack of benefit increases could hurt the city’s recruitment and retention efforts. But city officials pushed back against that theory during the meeting.
“I don’t have a statistical answer…but I will say I think that current salaries, starting pay, what we are offering to you when you are working, has a greater impact on recruitment,” Ireland said. “I think the facts would show that that has a greater impact than something an employee is going to get 25 years down the road.”
But Mendelsohn’s debate over which system should get priority drew criticism from others at the committee meeting.
“I do think that it is dangerous rhetoric to make it seem as if we have to choose from addressing the pension for our civilian employees and our uniformed officers as if they aren’t two different funds — and they are,” District 7 Council Member Adam Bazaldua said. “I honestly don’t understand what a lot of the narrative was and where this presentation has gone.”
Mendelsohn also claimed city staff were more interested in moving the Employee Retirement Fund plan along — because most employees are part of that system.
“I am invested in making sure that they, whether on the police and fire side or general employee side, their pensions are met,” City Manager T.C. Broadnax said. “It’s a little offensive to think that we can’t do both.”
Moving forward
Thursday’s briefing was a precursor to a discussion with full council that should take place within the coming months.
Right now, staff has laid out a few timelines that tentatively slates council to discuss and finalize a preliminary pension framework in early February. From there the city will take until early summer to meet with various fire and police stakeholders — and review real estate monetization options — with the council scheduled to vote on a final plan in June of this year.
The deadline for the plan is fast approaching. While the remedy is a state requirement, city officials say they realize some hard financial years are coming up. But also made the promise that the two pension systems are in good hands.
“I just want to make sure uniform police [know]…we got your back,” Mayor Pro Tem Tennell Atkins said. “Everyone on this council today, you have their desire…and their faith that we are going to support you 100%.”
Got a tip? Email Nathan Collins at ncollins@kera.org. You can follow Nathan on Twitter @nathannotforyou.
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