Special to The Dallas Examiner
Mayor Eric Johnson on Monday announced the formation of a study group that will develop recommendations to put the Dallas Police and Fire Pension System on a better path to solvency.
The mayor asked Bill Quinn and Rob Walters to put together the group of financial and pension professionals outside of City Hall to study potential solutions. Quinn is the chairman of the Dallas Police and Fire Pension System Board of Trustees and formerly served as the chair of a task force that recommended a series of changes to shore up the city’s Employees’ Retirement Fund — the pension system for civilian city employees — in the mid-2000s under Mayor Laura Miller. Walters, who also served on the Dallas Police and Fire Pension System’s Board of Trustees, is a partner at Gibson Dunn and the chairman of the Dallas Citizens Council.
As they develop recommendations, Mayor Johnson wants the study group to involve advisors, consultants, and institutions as they see fit.
Because the Dallas Police and Fire Pension System is governed by state law rather than city ordinance, the 85th Texas Legislature overhauled the troubled system, which was on a fast track to insolvency, through HB 3158. The legislation passed unanimously after a protracted debate among city officials, lawmakers, police officers, firefighters, retirees and the pension system’s board.
A provision in HB 3158 requires the pension system to submit plans to achieve full funding within 30 years, based on an independent actuarial analysis, to the Texas Pension Review Board in 2024. Currently, the system is about 46% funded and is projected to reach full funding in 75 years.
The mayor hopes to reach a consensus on a path forward earlier, during the interim period before the 88th Texas Legislature, which begins in 2023.
“A shaky pension fund hurts our taxpayers and our public safety efforts. We need to be able to attract and retain the best of the best in our police and fire departments,” said Mayor Johnson. “While the law says we could wait another few years to tackle this problem, we cannot afford to cross our fingers and hope for the best. It is prudent and responsible to start this process now so that we can proceed in a collaborative manner and with data guiding our decision-making.
“I am grateful to Bill Quinn and Rob Walters for taking on this critically important effort,” the mayor added. “They have the experience, the wherewithal, and the selflessness to find dedicated experts who will give us viable and fiscally sound options for putting the fund back on a clearer path to solvency.”
Unstable pension systems can have a significant impact on a city’s operations. The Dallas Police and Fire Pension System’s financial crisis in 2016 and 2017 led to an exodus of hundreds of officers and firefighters and several credit downgrades of the city’s debt from ratings agencies.
HB 3158 aimed to halt the fund’s collapse by increasing contributions from the city’s taxpayers and from police and firefighters, restricting Deferred Retirement Option Plan (DROP) withdrawals and annuitizing those payments, tying future Cost-of-Living Adjustments (COLA) to fund performance, raising the retirement age, decreasing the multiplier and maximum fund benefit and giving the mayor the ability to appoint the majority of the board.
Quinn and Walters were two of the original mayoral appointees to the overhauled board.
“It has become increasingly clear that the pension fund needs additional support,” Quinn said. “I am confident that we will make recommendations with the best interests of taxpayers and police and firefighters in mind. I am excited to be part of this effort.”
“The pension rescue four years ago was an important undertaking,” Walters said. “But we have much more work to do to get this pension fund where it needs to be, and I am grateful to Mayor Johnson for starting this process now and honored to be part of the effort to identify solutions.”
The city now contributes more than $150 million annually to support the fund, which serves 5,121 active members and 5,039 retirees and beneficiaries.
“Our path to solvency is very long and narrow,” said Kelly Gottschalk, the executive director of the pension system. “I appreciate that Mayor Johnson wants to find solutions now to put us on a better path. He made excellent choices in Bill Quinn and Rob Walters, who know this pension fund and its challenges well and have the best interests of the city and public safety workers at heart.”