DALLAS -- Hundreds of former and current police officers packed pension board meeting Thursday to hear details of a bailout proposal to save their failing pension fund.
The plan would spread the pain all around.
It would increase the contributions of current police officers, reduce the cost-of-living increases for retired public safety workers, and place strict limits on lucrative special accounts called deferred retirement option plans (DROP).
The plan also calls on the city to contribute $650 million in one lump sum or make payments of $250 million each in four installments over 10 years.
The city has not said whether it will agree to do it. If they did, the city likely have to issue pension obligation bonds to do it, ultimately costing taxpayers.
The pension fund is close to $2 billion. It’s projected to go broke by 2030.
“There was a decade of deception and a decade of greed,” said Dallas City Councilmember Scott Griggs, a pension board member. “There were four firefighters sitting around this board, there were four police officers, and there were four Dallas city councilmembers. The problem's a third, a third, and a third.”
Griggs drew cheers when he said he believed the former head of the fund acted criminally. The pension got in trouble after former administrators put hundreds of millions in risky real estate investments.
Some of those administrators and former investment advisors are now reportedly under federal investigation.
“I can't turn back the clock,” Griggs said. “All we can do now is go forward.”
Like many retirees, former officer Nancy Webb is worried.
She’ll worried if she’ll have a pension and she’s worried about the plan to reduce cost-of-living adjustments.
“It's hard after we worked as hard as we have after all these years, and put our lives on the line, that we come back here and it's being cut out from underneath us,” she said.
The plan involves a laundry list of changes.
It would involve increasing the contribution of police officers and firefighters who are not in DROP from 8.5 percent to 9 percent. The contribution of active police officers and firefighters who are in DROP would rise 4 percent to 9 percent.
That is the highest percent allowed under state law.
Pension board members plan to seek legislative approval to raise ultimately raise the contribution rate for all active police and firefighters to 12 percent by October 2018.
The city has agreed to increase its contribution from 27.5 percent to 28.5 percent –- also the highest percent allowed by law. It will cost $2.9 million in the next budget.
It would spread the pain to retirees, too. They would see their cost-of-living adjustments dropped from 4 percent to 2 percent.
“Even though it’s painful, it’s something we’ve got to do,” said City Councilmember Philip Kingston.
Big changes would also be made to DROP.
The DROP mechanism allows police officers and firefighters to remain on the job while their monthly benefit checks go into a special account. The pension fund guaranteed those accounts an interest rate return of 8-to-10 percent, no matter how well the overall fund did -- and therein lies a lot of the overall fiscal crisis.
Losses as a result of the DROP program have been mounting since the economic meltdown of 2008, forcing the pension fund to siphon money away from assets to pay future benefits in order to put that money in DROP accounts.
DROP now accounts for 58 percent of the pension’s assets, up from 30 percent just six years ago. About 1,300 police officers and firefighters are currently in DROP.
Under the plan, the interest paid on DROP for active police and firefighters would be 3 percent for seven years. Payments could be deferred into DROP accounts for active members for 10 years. It would also make significant changes to the DROP program for those who are retired.
Some had concerns about the 10-year cap. There are currently 224 active police and firefighters who would be affected by the change.
“This is the one that will force retirements,” said board chairman Sam Friar, a Dallas firefighter. He wanted to grandfather in existing DROP members.
“Why would you stay here and just work for your salary?” said board member Ken Haben, a Dallas police sergeant.
One board member pointed out that Fort Worth’s DROP plan places a five-year cap on deferments. It was also pointed out that the members overwhelmingly indicated they want a cap on the DROP program.
“There's a lot of pain to go around -- the younger members are going to feel it,” said Sgt. Steve Wojcik, who served on the pension board from 2011 to 2015. “Older members are going to feel it. The retirees are definitely going to feel it. But we need the city to step up and do their share, too.”
Wojcik is among those affected by the proposed cap on DROP. He supports the change, even though it’ll cost him.
“With that provision in place, you’re going to have another 224 people -- police and fire -- that are going to pretty much be forced to retire,” he said. “That’s their option. They could stay and work for their paycheck. But any more DROP distributions will cease, so they’re going to retire and the city has to take that into consideration to fill those vacancies. You’ll have 224 people go in a pretty short time.”
The board did not take a vote on a final plan that would go to police and firefighters, as expected. It is expected that the board will finalize the plan in a matter of days so that it will be put out for a vote by late September, so the cuts could take effect Oct. 1.
Retired police and firefighters are not eligible to vote on the proposed changes -- even the ones that affect them.
Lingburge Williams retired in December after more than 34 years as a firefighter. He understands that changes have to be paid to ensure the pension for retirees like him and those who follow.
“It’s is a lot of sacrifice,” he said. “I just think everybody needs to pony up. It doesn’t need to be just us making the sacrifices.”