Courtesy of Mish.
The Dallas Police and Fire Pension plan is severely underfunded. Not even a $1.1 billion taxpayer bailout the plan officials request will make the plan whole.
Discussion of a possible freeze in lump sum payments led to a run on withdrawals. The board still has not suspended lump sum payouts.
On Saturday, Dallas Mayor Mike Rawlings proposed targeting those who got rich from the system. This is sure to accelerate the run on assets via lump sum withdrawals.
As background to this story, please consider my October 16 article: Dallas Police Retiring in Droves, Taking Lump Sum Pensions, Fearing the Money Isn’t There (And It Isn’t).
Today, DallasNews reports City’s plan to save Dallas Police and Fire Pension Fund will target those who got rich from the system.
A City Council briefing posted online late Friday night provided the first glimpse into the city’s plan to save the Dallas Police and Fire Pension System from insolvency within the next decade or so. Rawlings and the City Council will discuss the plan Wednesday.
While the presentation is short on details, Rawlings said he can be clear about a few aspects. The city won’t pay the $1.1 billion bailout that pension officials want. Taxpayers will chip in, but he doesn’t want to issue debt to pay for it. Base benefits will be protected. And the city’s general philosophy is that those who profited from the overly generous benefits will have to take part in the banquet of consequences.
Mish Comment: The stance that Dallas will not pony up $1.1 billion is a good one but does not go far enough. Taxpayers should not pay an extra dime.
Pension Board Chairman Sam Friar said he was happy to work with the city but called the proposal a “non-starter.” And although he and Rawlings both say they want to work together, the city’s stance will almost certainly lead to a showdown at the state Legislature next year. Pension officials hope active police and firefighters will vote to support a package of benefit cuts that they believe will pass legal muster.
Friar believes it’s illegal to penalize members for benefits they’ve already received and accrued.
“This is the one issue that we’re just not going there,” Friar said. “We will not do it. The pension board — we will just not go there. … You cannot put toothpaste back into the tube.”
Mish Comment: You either put toothpaste back into the tube, or those standing in line to brush their teeth will discover there is no toothpaste. At the very least, stop squeezing the tube via lump sum payments.
Ultimately, the Legislature is the biggest unknown. The pension system is governed by state law, not city ordinance. The City Council has four of 12 seats on the board but otherwise has no real power over the fund even though taxpayers have been paying more than $110 million into the pension system each year.
Mish Comment: City taxpayers have paid enough, too much actually. Benefit cuts drastically needed.
