by |  July 6th, 2017
  

Written by James Quintero and Taylor Zavala

Dallas Mayor Mike Rawlings has come under fire recently for his criticism of a controversial bill proposing to overhaul the Dallas Police & Fire Pension System (DPFPS) that’s been referred to as a “massive taxpayer bailout.” Looking at the latest analysis from the Legislative Budget Board, it’s easy to see how Mayor Rawlings might have come to that conclusion.

Here are some of the major changes proposed by the bill:

Source: Texas Legislature Online

If you’re a Dallas-area taxpayer, then you’ll want to take notice of a few things from the chart above. First, the bill is proposing to hike city contributions from 27.5 percent to 34.5 percent, meaning a sharp increase in costs that could mean higher taxes, fewer city services, or some combination of the two.

Second, even if the bill is enacted, the DPFPS will still retain significant levels of pension debt. Unfunded pension liabilities are expected to hover around $2.3 billion, a figure that’s likely understated given the generous actuarial assumptions made. The bill assumes a rate of return of 7.25 percent, much higher than actual investment returns realized in years past.

Third, the bill’s enactment will do some to improve DPFPS’ fundamentals—but not nearly enough to be comfortable with. The plan’s funded ratio is only expected to increase from 36.8 percent to 48.6 percent, which is below the oft-cited 80 percent threshold and nowhere near a fully-funded level (100 percent or greater). The system’s amortization period is also expected to remain troubled (58 years), far greater than the Pension Review Board’s maximum recommended level of 40 years.

Source: Texas Pension Review Board

Considering all of the new taxpayer money that may be thrown at the DPFPS and its still-troubled financials, Mayor Rawlings isn’t wrong to be critical of the bill. Right now, it looks like it will only kick the can down the road at taxpayer expense and doesn’t offer a long-term fix (i.e. defined contribution plans for new employees) or give the community tools to make short-term adjustments.


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