After months of lawsuits, tense rhetoric and hundreds of millions of dollars rushing out the door of the failing Dallas Police and Fire Pension System (DPFP), House Pensions Committee Chairman Dan Flynn, a Republican, filed a bill Tuesday afternoon that he hopes will prevent the system from going insolvent in the next decade. The full 177-page bill can be read here, but, for those who would like to avoid death by boredom today, the key components of the legislation are as follows (per the Dallas News):
- Raise the full retirement age for Dallas police officers and firefighters to 58 from 55.
- Increase employee contributions to 13.5% of payroll from 8.5%.
- Increase Dallas taxpayers contributions to 34.5% from 27% in 2015.
- Eliminate guaranteed cost-of-living increases.
- Eliminate interest rates on the deferred retirement option plan, known as DROP. (DROP allowed veteran officers and firefighters to retire on paper while their pension checks accrued in what were effectively high-interest savings accounts.)
- Limit future participation in DROP to 10 years.
- Lay the groundwork for a future board to reclaim the unsustainably high interest payments that have already credited or been paid out through DROP — a move that would almost certainly prompt a legal challenge.
- Pay out the existing $1 billion in DROP accounts to retirees in annuities over their projected life span, except in case of emergencies. (More than $500 million in lump-sum DROP withdrawals had previously accelerated the system's projected insolvency date.)
- Significantly overhaul the makeup of the police and fire pension board of trustees to include more credentialed professionals and only two active or retired police and firefighters.
Of course, no amount of incremental taxpayer funding will ever be sufficient to stop angry pensioners from playing the victim card when the realities of their pension ponzi schemes are exposed for all to see.
Officers giving up everything as the city gives what ? Changes needed, retirement age, multiplier , board etc.. https://t.co/RYSCSk0Okp— Frederick Frazier (@Frazier7324) March 7, 2017
And we kind of see Frazier's point, except for the fact that the increase in the taxpayers' contribution rate to 34.5% will result in an incremental $22 million in costs for Dallas residents each year...so actually, in hindsight, we're not sure we understand his point at all.
Dallas Mayor Mike Rawlings also expressed frustration that Flynn's bill left his city wide open to police and fire back-pay lawsuits which would also fall on taxpayers to fund.
"It's complicated," Rawlings said. "There's a lot of stuff there. That's why there has got to be a lot of work sitting down with pencils and working out the details."
City officials didn't get one major provision they wanted: The bill currently doesn't include language to exempt the city from liability in multibillion-dollar police-and-fire back-pay lawsuits. Rawlings said it's "critical that we get that resolved this legislative session."
But the most important part of the bill, Rawlings said, is governance. He's not quite comfortable with the board of trustees yet, but wants to make sure taxpayers "don't get whipsawed into this situation again."
Meanwhile, more conservative voices pointed out, as have we on numerous occasions, that the DPFP is just the latest example of the "failure of the defined benefit model."
James Quintero, the director of the center for local governance at the conservative Texas Public Policy Foundation, said the Dallas pension system is an example of "the failure of the defined benefit model."
"There is a lot behind that statement, but it can be boiled down to the simple premise that these plans have been over-promised and underfunded for a long, long time," Quintero said. "And what you're seeing is the chicken come home to roost."
Quintero said a defined-contribution plan might be a tough sell this legislative session, especially with city leaders and pension officials both supporting the defined-benefit model. And pension officials say the hole they are in is so deep that switching to a defined-contribution plan could be more expensive than saving the pension system.
Of course, as we've already noted, the $7 billion shortfall in the DPFP triggered downgrades to Dallas’s credit rating from Moody’s and S&P in recent months which has wreaked havoc on the city's bond yields. (chart per Bloomberg).
But don't worry dear pensioners, there is no problem too large for taxpayers to bail out.
A summary of the plan adopted by the DPFP board can be viewed below: