The proposed changes to Dallas Police and Fire Pension benefits have been rejected by a significant margin.
Voting in the 2016 plan amendment election ended Saturday at 12 p.m. producing the following results on three ballot items.
Ballot Item 1 – Plan Changes Related to Benefits – NOT PASSED – 45.0% In favor, 55.0% Not in favor
Ballot Item 2 – Plan Changes Related to Service Trustee Board Positions – PASSED - 66.9% In favor, 33.1% Not in favor
Ballot Item 3 – Requirements to Receive Credit for Additional Compensation Upon the Award of Back Pay – NOT PASSED - 64.8% In favor, 35.2% Not in favor
Sixty-five percent of police and firefighter would have had to agree to the changes that would cut benefits and increase contributions.
The election results are not considered final until certified by the Board. The Board's review of election results is scheduled for a Special Board meeting on December 29.
If no changes are made, the $2.39 billion dollar fund would be bankrupt by 2028.
On Saturday, Dallas Mayor Mike Rawlings reacted to the development: "This is disappointing, but it doesn't change the fact that the changes we need to save the DPFP will have to come at the state level."
The changes will only cover about 55 percent of the funding shortfall, which is why taxpayers will end up footing a huge portion of the bill.
The city is also going to be asked to contribute at least a $1 billion to rescue the failing fund. That’s up from about $650 million a couple of months ago. It’s likely that the city would have to ask voters to approve a bond issue to do so.
The unfunded liabilities of the fund are about $4 billion.
The massive withdrawals totaling in excess of $400 million dollars were taken out of accounts known as the Deferred Retirement Option Fund, or DROP. The mechanism allowed veteran police and firefighters to effectively retire from the fund while they kept working.
Their pension funds were deposited into DROP accounts. Those accounts were paid a guaranteed interest rate of at least eight percent for many years, even in years when the overall pension fund was earning much less, or even took losses.
The discussion about the proposed changes caused many retired police and firefighters to panick and withdraw their money. Some police and firefighters retired just so that they could withdraw their money from their DROP accounts.
DROP now accounts for in excess of 50 percent of the pension’s assets, up from 30 percent just six years ago. Pension board members have been trying to quell the fears of retired police and firefighters to try to slow the run on the DROP money.
A YouTube video presentation released last month by the pension fund explains how the situation got so bad.
In July 2015, the fund’s actuaries projected it would run out of money in 2040.
But things continued to get worse, mostly due to poor real estate and private equity investments. By January, the fund was projected to run out of money by 2030.
The DPFP website memo states the following:
The decision by members of DPFP to reject proposed plan amendments for Item 1 and 3 does not change the mission of DPFP and its members, Board and staff. DPFP remains committed to making the necessary adjustments to ensure that Dallas’ first responders can rely on the retirement benefits they have earned.
The voting process was delayed by one lawsuit and occurred during another lawsuit by the Mayor in his role as a private citizen. The delay, along with the actions and statements of the Mayor, the Dallas City Council and City staff, makes it difficult to determine the factors that led to the vote outcome.
The website says the DPFP Board and staff now will be working to prepare and submit legislation to the Texas Legislature for its review and action in the upcoming 2017 session.
Additionally the website says "the DPFP Board and staff will also continue to work with the City of Dallas to overcome the current challenges and to try and find a solution to secure the fund so that Dallas’ first responders can continue to rely on the retirement benefits they have earned."