ARLINGTON — State legislators said Thursday that they have Dallas officials’ backs as they try to save the city’s police and fire pension system.
Not that the state is offering any money. The Legislature wants no responsibility for the fund’s $3.3 billion funding hole. But members of the House Pensions Committee offered moral support and a vow to work with the city and pension officials if they bring forward a workable solution, which will require state approval.
Committee members also offered a warning: Don’t make the Legislature come in there. City and pension officials may not like the results of state-mandated changes, said Dan Flynn, R-Van, the committee chairman.
“The state can always come in and do things,” Flynn said after Thursday’s meeting at the University of Texas at Arlington. “But we don’t want to do that. I believe local solutions are better.”
The pension fund is headed toward insolvency by 2030 or sooner. The system’s previous administration made risky investments and significantly overvalued the fund. The FBI has been investigating transactions related to the fund, pension officials say.
A lucrative perk called the Deferred Retirement Option Plan, known as DROP, has also greatly increased the fund’s liabilities.
DROP allows active police and firefighters to officially retire in the system and continue to work. Their pension checks go into the DROP fund., which for years guaranteed an interest rate of at least 8 percent, no matter how the fund performed. Retirees could keep their money in DROP and could withdraw money whenever they want, like a bank.
But DROP members withdrew more than $220 million from the fund in the last six weeks as pension board members proposed major benefit cuts.
Kelly Gottschalk, the executive director of the fund, said the fund will be in jeopardy if the pace of withdrawals continued because it would force the fund to sell its assets. But the board decided on Monday not to restrict withdrawals.
Gottschalk told the committee Monday that the gambit appears to have worked and calmed some nerves. Retirements have slowed since Monday, and a few have even rescinded their requests to retire, she said.
Gottschalk said she meets regularly with city officials about the city’s role in the pension fix, which could include a cash infusion of hundreds of millions of dollars and some governance changes to give the City Council more control over the fund.
Council member Lee Kleinman, the city’s liaison to the pension board and a former board member, said the pension has been “really, really challenging for us.”
Flynn said especially after the July 7 downtown Dallas ambush, state officials want to preserve the police and fire pension. But he wants the city and pension officials to take decisive action.
“I don’t want to come back and continue to kick the can down the road,” Flynn said. “It is time to correct it.”