The Dallas Police and Fire Pension is getting behind a Texas lawmaker’s plan to save the retirement system from financial collapse.
The fund’s board voted 9-0 on Monday to back a proposal by Dan Flynn, chair of the pensions committee in the state’s House of Representatives, that would raise the retirement age to 58 from 55, eliminate cost-of-living adjustments and lower a multiplier used to determine the size of officers’ and firefighters’ benefit checks, according to a summary on the pension’s website.
The plan would also increase Dallas’s annual contribution to 34.5 percent of payroll plus $11 million per year. The city contributed 27 percent in 2015, according to audited financial statements. Employee contributions would climb to 13.5 percent of their pay from 8.5 percent.
The $7 billion shortfall in the police and fire pension triggered downgrades to Dallas’s credit rating from Moody’s Investors Service and S&P Global Ratings. The system was battered by losses on exotic investments including Hawaiian villas, Uruguayan timber and undeveloped land in Arizona. The pension, which counted on annual investment returns of 8.5 percent to cover promised benefits, had an average 1.5 percent loss over the past five years, according to S&P.
Despite the poor returns, the city’s annual contribution is capped by state law, limiting its ability to boost contributions to make up for the investment losses.
As the fund’s financial health deteriorated, retirees concerned about its solvency and potential benefit cuts pulled more than $500 million in the last five months of 2016. The withdrawals were made from a program that allows employees to reinvest their pensions if they remain on the job after they’re eligible to retire, while earning 8 percent to 10 percent interest. In December, the pension suspended the withdrawals. Flynn’s plan would roll back the program.
The police officers and firefighters supported Flynn’s plan over one proposed by Mayor Mike Rawlings that would take back the interest payments.
The vote “is consistent with our efforts and doesn’t change anything for those of us working to save the system,” Rawlings said in a statement. “As we’ve said from the very beginning, all parties will have to share in the pain as we meet this challenge.”
Flynn is still working on legislation that would enact his plan, according to a spokeswoman who declined to comment on the pension fund’s vote.