DALLAS — Still recovering from the July sniper attack that left five law enforcement officers dead, the Dallas Police Department is facing a new crisis as its pension fund approaches insolvency and scores of officers, including Chief David Brown, announce unexpected retirements.
Problems with the Dallas Police and Fire Pension system have been simmering for years and were coming to a head when the July 7 sniper attack temporarily united the city. But, in recent weeks, the pension crisis has boiled up again because of fears about the system’s viability and pleas for calm from fund administrators.
Brown, who received national acclaim for his handling of the sniper attack, surprised the city on Sept. 1 by announcing his retirement, effective Oct. 22. He then moved up his retirement date to Oct. 4, saying he wanted to take advantage of “time-sensitive opportunities.” He did not elaborate.
The head of the department’s largest police union did elaborate on his pension concerns when he announced his retirement, also effective Oct. 4.
“I wanted to make sure that I was able to move it and get it invested somewhere safe,” the outgoing president of the Dallas Police Association, Ron Pinkston, told local TV. “I don’t know anything anybody else doesn’t know that has been doing their homework. And hopefully everybody that’s in my position, that’s thinking about it, is doing their homework, is checking their numbers.”
In a statement, Pinkston also accused city leaders of “running off talented officers” with bad pay and benefits and warned that “Dallas is on a dangerous path toward a future marred with fear and violence.”
The police and fire pension fund spent almost a decade basing its financial health on artificially inflated asset values from risky real estate investments, according to its executive director. After devaluing those assets to reflect actual worth, the plan is about 45 percent funded and projected to run out of money in less than 15 years, Texas Pension Review Board numbers show.
More than half of the system’s $2.5 billion in assets are in deferred retirement funds, according to Kelly Gottschalk, who took over in 2015 after the fund’s previous executive director resigned over the investment scandal.
Pension leaders expected some retirees to withdraw their deferred retirement funds early when proposed plan fixes were announced, Gottschalk said, but the numbers have been greater than expected. She declined to provide numbers.
“People are reading a lot into the chief moving his date up. Mr. Pinkston deciding to retire … then saying he did it to move his money certainly isn’t going to help the situation,” Gottschalk said.
Deferred retirement plans, in general, allow employees who are eligible for retirement to continue working while diverting a portion of their income to a tax-protected fund. They were created to offer incentives to departments’ senior officials to continue working a few extra years to allow for a more stable workforce and time to train replacements.
But the Dallas department designed its deferred plan differently, allowing members to work as long as they wanted and guaranteeing 8 to 10 percent interest. With hundreds of officers participating, that makes the program one of the largest threats to keeping the pension system financially stable, Gottschalk said.
Jean-Pierre Aubry, who studies public pension plans as associate director of State and Local Research at the Center for Retirement Research at Boston College, said the low level of funding of the Dallas police and fire pension plan was worrisome.
“The funded ratio for the local plans we have information for was 66 percent on average,” Aubry said. “Forty-five percent is very low in absolute terms.”
Plan administrators are hoping ongoing negotiations with the city will result in financial solutions.
“These are complicated problems that did not happen overnight, and solutions will not happen overnight,” city spokeswoman Sana Syed said.
The police and fire pension board has called a special meeting for Monday. In a Sept. 16 letter to members, board Chairman Sam Friar urged calm and asked members “not to act rashly.”
Still, about a dozen former and current officers stood in the pension system’s lobby one day last week, waiting to submit their retirement papers or transfer their deferred retirement funds to outside accounts. Several said they were concerned about access to those funds being frozen; others mentioned the cue from top officials.
Gottschalk said people were misreading Brown’s intentions. She said the chief told her that he only wanted to move up his retirement date to hit the Oct. 4 deadline to start receiving pension checks in November.
“I really do believe people who are rushing to retire or are rushing to move their money are going to regret that in the future,” she said.