Dallas officials are facing yet another blow to the city’s severely underfunded public safety pension fund. City staff told members of the Ad Hoc Committee on Pensions on Thursday that the unfunded liabilities for the retirement system have increased by $160 million dollars.
That brings the total unfunded liabilities to $3.2 billion. City officials only have until later this year to submit a plan to the Texas Legislature to fix the pension system.
One proposed fix to the system would mean paying more into the fund right away. That would require an increase of around $67 million in funding in fiscal year 2025.
“It’s a big number in that first year and what it means is that you’re not going to be able to do budgeting the way you’ve done it before,” District 12 Council Member Cara Mendelsohn said during the meeting. “You’re going to have to start over and radically look at our budget in a different way…but we can do it because we have a giant budget.”
While figuring out how much money to pay into the fund — and when — city officials also have to deal with another issue. The Dallas Police and Fire Pension Fund-hired actuary — and others inside City Hall — recommends increasing benefits for retired public safety employees.
The only problem is, any cost-of-living adjustment (COLA) will add to the city’s unfunded liabilities — and isn’t actually legal until the system is at least 70% funded.
Right now, city officials say that may not happen until 2046 and it would add over $120 million to the unfunded portions of the system — and increase the city’s annual costs.
“No one is going to have it 100% their way or 100% our way,” Mayor Pro Tem Tennell Atkins said during the meeting. “But we got to come to the conclusion that we are doing the best we can to make sure we are making the right decision.”
City officials also broke down what giving retirees a one-time COLA would do to the fund and city budget’s health.
In 2025, a 1% one-time increase to benefits would add over $20 million to unfunded liabilities right away — with another cost of nearly $60 million in payments over 30 years.
A 4% increase in 2025 could leave the city on the hook for a $88 million increase in unfunded liabilities and an addition $236 million in payments over 30 years.
Jack Ireland, the city’s chief financial officer, told the committee these options were not recommendations and were included for elected officials to consider.
“We are trying to think of different ways where we could put something out there,” Ireland said. “I know there is a lot of concern over not having something for so many years.”
Another possible option is a “13th check” — or a stipend.
“It would be like a one-time bonus,” Ireland said. “Our recommendation would be for any of those types of one-time bonuses…be based on rate of return.”
Ireland said he doesn’t think the city should be in a situation to offer a bonus or increase if the pension fund has a bad year and loses money. That rate of return should be around 6.5% in order to give any bonus, according to Ireland.
Mendelsohn has been vocal about making sure retirees get that cost-of-living adjustment — especially if the city’s non-sworn employees are getting an increase.
“The number one thing that I would like to hear colleague say is ‘we need parity’,” Mendelsohn said. “We can’t have one class of employees getting a COLA that the other class isn’t getting.”
City officials have said in the past that the city’s non-sworn Employee Retirement Fund and the public safety fund are two separate entities with two different reasons why they are in the shape that they are.
Mendelsohn also said the pension problems could be causing recruiting and retention issues as well.
“Everything we need to do on this plan has to be formed around that principal of how are we going to keep our officers, how are we going to attract new ones,” Mendelsohn said. “We are very close to having a public safety situation. I don’t want to say crisis, but we are very close.”
But city staff said during the meeting that while the police department may be falling short of hiring quotas, Dallas Fire Rescue doesn’t seem to be having that issue.
“So a fund doesn’t seem to be preventing people from coming in the fire department,” District 9 Council Member Paula Blackmon said during the meeting.
City staff said not being able to hire officers is a nationwide issue — not just in Dallas.
The retirement system’s oversight came into question during Thursday’s meeting too. Some of the pension fix recommendations are coming from Cheiron, the actuary firm hired by the Dallas Police and Fire Pension Fund's board.
That board is made up of eleven members — six of which are appointed by Dallas city officials. But some committee members said that system may not actually provide oversight.
“It’s really a false premise because they are absolutely obligated to the fiduciary duty to the [pension] fund,” District 13 Council Member Gay Donnell Willis said during the meeting. “But the taxpayer is really not represented there.”
It was risky real estate investments that landed the city in this position. The fund was on the brink of collapse when the Texas State Legislature stepped in to help the city in 2015.
The city’s plan is due in November and the city officials have only a few more meetings to finalize how to remedy the system before their deadline.
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.
