Dallas city officials have known about the pension crisis for years. They now have to make difficult decisions about how to begin restructuring their two major funds. According to Wednesday's City Council budget briefing.
The public safety pension shortfall came after the fund nearly went bankrupt in 2016 after funds invested in luxury real estate failed to generate returns. At the time, the fund was on the verge of default.
City officials say this is different from the roughly $4 billion in unfunded liabilities in the Police and Fire Pension Fund and the City Employees Retirement Fund.
Unlike 2016, the city has some time to rebuild the fund. But there is a deadline. The state's Pension Review Board is expected to submit a final report on the state of the pension system ahead of the 2025 legislative session.
Concerns about the pension system come at a time when city officials are seeking more staff for both the Dallas Police Department and the Dallas Fire Department. The proposed budget includes funding for about 300 new police officers, 100 firefighters and millions of dollars in overtime.hire more executives
“We've been working hard to hire more people and get more people to contribute to the plan,” City Manager TC Broadnax said at Wednesday's meeting.
Now, the city must figure out a way to increase allocations to the pension fund, both legally and by hiring executives in both departments.
“We're probably going to have to combine some kind of cash injection,” Chief Financial Officer Jack Ireland said at Wednesday's meeting. “…Also, the annual contributions from the city, probably employees, have also increased. I don't know.”
Ireland has announced that its Pension Review Board has hired a third-party actuary to begin reviewing the pension scheme. Actuaries are expected to release a preliminary report as early as October or November of this year.
City officials said they are also factoring in other funding sources.
“One of the things we are looking at as part of our debt analysis is issuing $400 million in pension liability bonds to address this specific need,” said Janet Weedon, Director of Budget and Management Services. said.
Currently, the Police and Fire Pension Fund has $3 billion in unfunded liability, and the city's Employee Retirement Fund has another $1 billion. Essentially, the city does not have enough funds to fully cover essential financial services for workers entering retirement.
As with other types of bond programs, that would require voters to decide during an election in May or November. Some council members said feedback from members of the city's bond task force felt rushed.
Some Dallas officials say an election in November would give staff more time to answer questions and better understand the pension situation.
“I feel like they were very rushed, and when I asked questions to the staff, I didn’t get answers,” said District 12 Councilwoman Carla Mendelsohn. “By delaying this a little bit, we will be able to get an accurate figure for the pension.”
Along with Mendelsohn, 7th Ward Councilman Adam Bazaldua also announced his support for a later election.
“Why do we need to do this in May elections instead of November?” Bazaldua asked.
Ireland says early approval of the bond would provide immediate funding to complete and start new public works projects. Staff also said the costs would likely be even higher for the November election.
Mr Broadnax said he did not think postponing the election would necessarily change the reality of pension and debt issues, saying these were two particular hurdles.
“What I don't want people to believe is that we're going to put citywide activities on hold because we might have to deal with pension issues,” Broadnax said. “We've known that for five years… so nothing has changed except the amount of money we have to give each year.”
City officials will await the actuary's report for further details and recommendations on how to proceed. It is expected that some information will be available as early as November.
Any tips? Email Nathan Collins at ncollins@kera.org. You can follow Nathan on Twitter @nathannotforyou.
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