The Dallas Police and Fire Pension System has been in financial disarray for years, but an independent actuary recently told City officials that the pension has $3.5 billion in unfunded liabilities.
During a meeting of the Dallas City Council Ad Hoc Committee on Pensions, representatives from the financial analysis and consulting firm Cheiron delivered a preliminary report to the committee discussing potential ways to stabilize the pension, including how much funding is needed.
Representatives from the firm said the contribution rates of Dallas public safety officers should not be increased and that their benefits should not be cut, as this could negatively impact public safety recruitment.
It would then fall to the City of Dallas to provide the additional funding needed to balance the pension system. Advisors told council members the City could begin accounting for the $3.5 billion in unfunded liabilities with a “lump sum” payment.
They said the City will be funding 37% of the pension in 2024, and a lump sum payment of $1.3 billion would be needed to maintain that contribution rate over the next 30 years.
“I hope you’ll run some scenarios with lump sums at different time periods also,” Council Member Cara Mendelsohn said. She asked if paying the lump sum would save taxpayer dollars.
The trajectory of the plan would result in the pension being only 30% funded, which Mendelsohn said “seems treacherous.”
“Is the system at risk of failure when you’re at that low of a level?” she asked.
“Only if the City cannot make the contributions,” replied consulting actuary Bill Hallmark.
Committee chair Tennell Atkins said the City will do anything needed to maintain the pension fund. The next Ad Hoc Committee on Pensions meeting is scheduled for December 14.
Cheiron will deliver its final presentation to the committee in February. The City must present a plan to fix the Dallas Police and Fire Pension System to the Texas Pension Review Board next autumn.
As previously reported by The Dallas Express, one accounting professor at the University of Texas at Austin recently discussed the state of the pension, saying it “looks terrible.”
“It’s less than 50% funded, the city and employee contribution is very high, and there don’t appear to be many obvious solutions,” said Michael Granof. “The situation is not improving; it’s getting worse.”
Note: This article was updated on November 17, 2023, at 9:10 a.m. to clarify comments made by Council Member Mendelsohn.