DALLAS – A bill filed today in Austin would restructure the board of the financially devastated pension system covering Dallas police officers and firefighters in an attempt to keep their retirement fund from going broke in a few short years.
The city's thousands of first responders do not pay into Social Security, leaving the ailing Dallas Police and Fire Pension System as the only retirement safety net for most.
House Bill 3158, filed by Rep. Dan Flynn, R-Van, chair of the House Pensions Committee, would bar elected officials from serving on the pension board, which currently includes four sitting Dallas City Council members, and stock it instead with people with financial backgrounds.
“This board will be free of heavy representation of those from elected positions and those without significant business experience,” Flynn's office said in a statement Tuesday.
“Additionally, it will be composed of business executives with strong training required in fiduciary duty to save the plan, and will be informed of the dangers of alternative investments and general board functions such as rule making," Flynn's statement said.
For months, the city of Dallas and the Dallas Police and Fire Pension system board have been at political loggerheads trying to agree on how to climb out of a multibillion-dollar shortfall that has already put the credit rating of the entire city at risk.
Recently, negotiations between the city of Dallas and first responder employees groups broke down over arguments over what benefits to cut to save money lost on years of risky real estate investments. Those risky investments were made by previous leaders of the pension board over a long number of years, but the current board is in turmoil with its membership as well over what benefits to cut, and how much extra the city should contribute.
Distrust boiled over in the past few months as Dallas Mayor Mike Rawlings sued the pension system to stop lump-sum withdrawals by frightened retirees creating a "run on the bank." The mayor's lawsuit was later joined by the four city council members serving on the pension board, who have now taken over the lawsuit.
In short, a Dallas mess has became an Austin mess.
Mayor Mike Rawlings expressed support for Rep. Flynn's bill.
"I'm grateful for Chairman Flynn's leadership and genuine efforts to save the Dallas Police & Fire Pension," Rawlings said in a written statement late Tuesday. "Chairman Flynn's bill gives us a path to save the fund in the coming years if we put the appropriate governance in place. We will need a board of financial experts and professionals who can work to save the fund without getting hampered by city politics. Taxpayers are willing to pay their fair share to protect our police officers and firefighters, but we must get the governance right."
Rep. Flynn’s bill attempts to build more financial responsibility into the pension system, which by law is governed by its own board.
That 12-member board is currently made up of four Dallas City Council members (all mayoral appointees), four fire representatives and four police representatives.
Having a background in finance is not a prerequisite for serving on the board, which Flynn’s bill aims to fix.
Flynn’s bill would change the board’s 12 members to:
- three trustees appointed by the mayor of Dallas;
- two trustees appointed by the Dallas City Council;
- two trustees appointed jointly by the Dallas Police and Fire Pension System’s executive director and city manager;
- city of Dallas’ chief financial officer;
- two trustees, one police and one firefighter (active or retired) “selected in a manner determined by rule by the board”
- two additional trustees appointed by the board.
The bills says that all appointees except for the two selected from the police and fire ranks “must have demonstrated financial, accounting, business, investment, budgeting, real estate or actuarial expertise” to serve.
The bill, which must make it through the legislative process -- which could result in slight or significant changes -- also includes cuts to benefits.
DPFP Board Chairman Sam Friar said in a statement Tuesday that he cannot support Flynn’s bill “in its current form,” but pledged to “work for a solution in the spirit of ‘shared sacrifice.’”
“While we appreciate the efforts by Chairman Dan Flynn and his staff to find a solution, the bill filed today includes several provisions that would place an undue share of the burden to restore the plan on our active and retired first responders,” Friar said.
Friar said these issues include:
- empowering the incoming board to potentially take back benefits already earned (referred to as clawbacks);
- little assurance of adequate financial contributions from the City of Dallas; and
- city control of the DPFP Board of Trustees.
“These provisions are not in the best interest of pension members or citizens who value the city’s ability to keep its streets and neighborhoods safe, nor do they meet the expectations of ‘shared sacrifice,’” Friar said in his statement.’’
Dallas is not the only Texas city with a pension catastrophe looming.
On Monday, Rep. Flynn, a former banker, filed two pieces of proposed legislation to address a whopping $66 billion shortfall in 36 of the states' 93 taxpayer-backed pension plans.
Joint Resolution 85 and House Bill 2434 would "direct those plans in the poorest shape to work out their issues locally and submit plans to the state that would bring them in line with a strict set of requirements," Flynn's office said in a statement.
"These plans, if left uncorrected, have the potential to cause extensive damage across the state if local and state of Texas bond ratings are downgraded, as this would cost the state of Texas millions of dollars."
Specifically, HJR 85 says that the state of Texas "is not responsible and will not bail out those funds in the future."