The chairman of the Texas House pensions committee said Friday he can’t rule out moving Dallas police and firefighters away from a pension plan and toward a defined contribution retirement plan.
Such a plan would mean the city would have to only pay in a promised amount of money to a worker’s retirement account. Actual benefits might not be guaranteed.
Many police, firefighters and even city leaders have bristled at that possibility as the pension system faces insolvency by 2028. And state Rep. Dan Flynn, R-Van, would rather not force a defined contribution plan on first responders. But, he said Friday, “everything would have to be considered” if city and pension officials don’t come to the Legislature with a solution to rescue the failing fund.
“As far as I’m concerned, it’s all on the table,” Flynn said.
Flynn’s comments in a phone interview came a day after he wrote a letter to Dallas Mayor Mike Rawlings to chide him for his recent testimony to the Texas Pension Review Board. The mayor told the board that the city could be forced into bankruptcy because of the the fund’s liabilities and a looming police-and-fire pay lawsuit, which could cost the city billions.
Through a spokesman, Rawlings declined to comment Friday. The mayor and Flynn plan to meet in the coming weeks.
The defined contribution suggestion is seen by pension advocates as a worst-case scenario. An influential group, funded by Houston billionaire John Arnold, suggested last month that Dallas switch to a defined contribution plan.
Josh McGee, who co-authored the report and chairs the Pension Review Board, said Friday that he would like to see “a greater volume of dialogue” among city, state and pension officials.
“Everybody needs to come together to fix this,” he said.
Texas Association of Public Employee Retirement Systems President Paul Brown, a critic of McGee’s, mostly agreed and said the city needs “to step up to the plate” and come up with a plan.
Uncertainty has reigned in recent months and caused great anxiety among active and former police and firefighters. Some have suddenly retired or pulled lump sums out of the pension system to avoid benefit cuts, making the situation even worse for future retirees and the city.
And the focus is now fully on Dallas ahead of January’s legislative session after Houston city leaders recently struck a major deal to resolve their pension crisis.
Rawlings’ talk of bankruptcy wasn’t new. But Flynn doesn’t want to hear any rhetoric about the city shirking its responsibilities to pay promised benefits by filing bankruptcy.
“That’s not a plan,” Flynn said. “That’s something that California would do.”
Still, the city’s financial outlook is precarious, as multiple credit downgrades have shown. An unfavorable judgment in the pay lawsuits alone could leave the city facing bankruptcy. And the pension system is on track to become insolvent within about a dozen years, and possibly sooner.
The police and fire pension is governed by state statute, which means the Legislature will have to approve any grand bargain reached by city leaders and pension officials. It also means police and firefighters have been able to vote on their own benefits without taxpayer approval. Some City Council members are on the board of trustees, but they are a minority on the pension board — and many past council members were frequently absent from meetings.
For years, the fund’s members guaranteed themselves generous benefits, some of which made them into millionaires. Other benefits, such as a 4 percent annual cost-of-living increase, were largely unmatched by the private sector.
The system’s investment portfolio was also unable to keep up with the benefits. The previous administration bet heavily on risky real estate and overvalued it for years, creating a massive funding hole.
Pension officials have offered their own solutions. They are asking members to vote largely to cut their own benefits and increase their contributions to the fund. The benefit election begins Monday and ends Nov. 28.
The board also wants the city to pitch in about $1 billion.
Rawlings praised the fund’s new administration and its efforts during last week’s Pension Review Board meeting. He put the blame on the old administration, police and firefighters and the state for allowing the plan to operate semi-independently.
But Flynn said it’s still the city’s problem to fix. He backed the $1 billion suggestion and offered a few of his own, some of which go even farther than police and fire officials want.
Flynn said the city will ultimately have to pay the price for its lack of oversight over the years, including the taxpayers who elected their leaders.
City officials don’t see it that way. They have said they want more control over the fund. But they haven’t offered specifics on what they will contribute to the fix. Rawlings said the pension board’s changes don’t go far enough, and city officials want to avoid a $1 billion payment if they can because it means higher taxes or significant spending cuts — and most of the city’s budget already goes to public safety.
Dallas Police and Fire Pension Board Chairman Sam Friar hopes police and firefighters, some of whom have been reluctant to embrace the changes, are paying attention.
“Some of our members refuse to believe this is real,” he said. “The letter from Chairman Flynn should make them believe this is real.”
Friar also hopes city leaders are paying attention and that maybe raising taxes will be the best option.
“We need some money from the city,” Friar said. “Unfortunately, it may be a bad political move for them, but we’re talking about the life of this pension fund and keeping a viable police force and fire department.”