A few days ago we noted that the Dallas Police and Fire Pension System (DPFP) took the unprecedented step of halting withdrawals from their DROP fund after a "run on the bank" pushed to the entire pension system, and the City of Dallas, to the brink of liquidity crisis (see "In Unprecedented Move, Dallas Pension System Suspends Withdrawals"). Now, a local CBS affiliate in Dallas is reporting that the pension crisis is driving a massive surge in police resignations.
Interim Dallas Police Chief David Pughes told city council members Monday that 99 officers have left the department since October 1.
City councilman Philip Kingston is among those who blame the situation on the cash-starved police and fire pension fund.
“It’s concerning, but it’s not very surprising with the turmoil surrounding the pension system,” said Kingston.
In a statement, Mayor Mike Rawlings said, “This is why we are working so hard to address our pension crisis.”
The Dallas Police Association said in any given year, about 180 officers leave the department — either to retire or work at higher-paying departments.
About half the number have left in a two and a half month period.
Of course, not surprisingly, the majority of the resignations came from older, tenured officers who had the most to lose.
“I think most of those 99 were tenured officers, so those are our most experienced officers, the majority investigative detectives who solve crimes everyday,” said Mata.
Councilman Kingston acknowledges the department’s challenge. “I think Chief Pughes is going to have to be creative. There’s nothing we can do to fix that in the short term. He has the number of officers he has and he has got to get results using those officers.”
Meanwhile, just like any other government problem, Dallas city council members have decided that the appropriate solution to their liquidity crisis is to offer police officers a 27% pay increase to be phased in over the next three years...that should be "roughly" inline with inflation, give or take 25%.
After months of negotiations, city council members will vote Wednesday on a new contract not only for police officers, but firefighters and paramedics as well.
Under the terms, most police officers, firefighters and paramedics would receive merit increases of ten percent the first year, five percent the second year, and ten percent the third year.
The Dallas Police Association and a city council member say they think the raises will help keep younger officers from leaving for other departments.
“Those individuals who possibly were thinking of leaving, yes, I think this prevents them from leaving. It helps them stay,” said Mata. “So it was definitely a move in the right direction.”
“It was important to get those numbers up what our younger officers can make at other places,” said Kingston. “It’s just the right thing to do in general.”
As we've stated many times over the past several months of following the DPFP implosion, taxpayers will be the ultimate loser here...looks like that's already starting to play out.
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For those who missed it, here is what we recently posted after the DPFP decided to halt pension withdrawals.
Two days after the Mayor of Dallas, Mike Rawlings, filed a lawsuit against the Dallas Police and Fire Pension system to block withdrawals, which he referred to as a "run on the bank" of an "insolvent" pension system in "financial crisis, the Pension's board has finally taken steps to halt further withdrawals. Of course, this delayed action has come only after $500 million in deposits have been withdrawn since just August.
According to the Dallas Daily News, an incremental $154mm in withdrawal requests were pending at the time the decision was made earlier today.
The Dallas Police and Fire Pension System's Board of Trustees suspended lump-sum withdrawals from the pension fund Thursday, staving off a possible restraining order and stopping $154 million in withdrawal requests.
The system was set to pay out the weekly requests Friday. Pension officials said allowing the withdrawals would leave them without the liquid reserves required to sustain $2.1 billion fund.
"Our situation is currently critical, and we took action," Board chairman Sam Friar said.
While Dallas citizens cheered the decision, even opponents of the Mayor's admitted that the redemptions had to be halted if the city had any chance of saving the pension system from insolvency.
Rawlings on Thursday afternoon told a crowd gathered at a Dallas Regional Chamber that "the bleeding has stopped. We can turn this ship around."
The crowd responded with cheers after the mayor's announcement of the board's decision.
At the pension board meeting, the mood was more somber.
Council member Scott Griggs said he couldn't let the $154 million "go out the door" on Friday.
His council colleague, Philip Kingston, a board trustee, said the mayor "unquestionably" forced the pension board's hand. He said Thursday was "the worst day I've had in public office."
"Unfortunately, financially, this had to happen," he said.
The fund has about $729 million in liquid assets. It needs to keep about $600 million on hand, meaning the restrictions could have been coming at some point even without the mayor's actions. The withdrawal requests this week alone would have meant the fund would dip below that level.
Of course, not everyone was happy with the decision as at least one retired police officer threatened a lawsuit to force the fund to honor redemption requests while another declared that Mayor Rawlings had "successfully screwed over the retirees, the firefighters and the police officers."
One retired police sergeant, Pete Bailey, suggested a lawsuit could be in the offing if the system didn't pay out the requests that were made Tuesday. Friar understood that they might deal with more litigation.
"We may just have to deal with that, but that's what the board decides," Friar said. "We acted in the best interest of the pension fund today."
Retired Dallas police officer Jerry Rhodes, a pension meeting fixture, said he believed the board did what it had to do. Then he sarcastically lauded Rawlings.
"Merry Christmas, mayor," he said. "Hopefully you have a good Christmas because you have successfully screwed over the retirees, the firefighters and the police officers."
Perhaps future ponzi schemes pension systems will take note of Dallas' current situation prior to guaranteeing 8% returns on retirees' pension balances. Who could have ever guessed that a decision like that could have backfired so badly?