Members of the Dallas Police and Fire Pension Fund will vote in November whether to reduce their benefits. If the answer is "yes," the chairman of pension fund board calls it only a first step toward saving the troubled retirement system. But commentator Lee Cullum says something has to be done.
Ever since the crash of 2008, knowing Cassandras have warned that the next storm to blow in would be Hurricane Pension Funds, and now that is exactly what is happening. Promising too much, earning too little, these repositories of hope for peaceful, prosperous retirement for millions of public employees across the U.S. are in Katrina-like trouble.
A new report by Moody’s Investors Services says they’re underfunded by $1.2 trillion. And the Associated Press said that half the national gap at the end of 2015 could be traced to California, Illinois, New Jersey, Pennsylvania and – wouldn’t you know?—Texas, where we thought conservative financial convictions would keep us on track.
Not so with the Dallas Police and Fire Pension Fund. Lousy management by previous administrators has left firefighters and law enforcement officers facing falling benefits, rising contributions and a fund on its way to insolvency.
The city already contributes $115 million a year to the Police and Fire Pension Fund. If the board gets the extra $36 million it requested, taxpayers deserve a decisive say in how that fund is governed. No longer will it work for the City Council to have only four seats on the board while eight are controlled by mostly retired police and firefighters.
However, there is a far graver catastrophe lurking in a cluster of lawsuits stemming from a referendum in 1979 that gave police and firefighters a 15 percent pay raise. A provision in that referendum said this: “the current percentage pay differential between the grades in the sworn ranks of the Dallas police force and firefighter and rescue force shall be maintained.”
Some later concluded that this meant forever, not just for the pay raise at hand in 1979. If so, City Manager A.C. Gonzalez says the adjusted salaries would cost another $230 million a year.
If the lawsuits are lost, it will wreak havoc not just for the annual budget, but for the Police and Fire Pension Fund itself. Pension benefits are based on salaries. And if those higher salaries must be paid retroactively, possibly over 20 years, the taxpayers would be looking at $1 billion due, possibly a lot more, and a pension fund well beyond the rescue of a city by then drowning in back pay and soaring pension obligations impossible to meet.
Dallas would drag the whole of North Texas into the circle of hell now threatening the financial health of the nation. That’s why Gonzalez is pressing members of the Police and Fire Pension Fund board to join forces with the city to fight a crucial battle at the Texas Legislature that would restore to Dallas its immunity to contract-related lawsuits. Without this legal protection, stripped away by clever lawyers possibly on the other side of the salary case, the situation looks grim. Police and firefighters cannot afford to delude themselves about the definitive danger that awaits them. If they think the current shortfall is a problem, try bankrupting the entire fund. That is exactly what’s at stake.
Lee Cullum is a veteran journalist and host of KERA TV’s “CEO”. KERA airs commentaries to reflect multiple perspectives and voices. We welcome your feedback at keranews.org.