Board Shuts Down Enrollment in Lucrative Pension Plan for Cops, Firefighters
Dallas Police Department
The DROP -- Deferred Retirement Option Plan -- program available to Dallas police and firefighters is a really good deal. When participants become vested in their pensions after 20 years of working for the city, they can elect to receive their pensions and continue working. The payments are placed into a DROP account that's guaranteed to receive 8 to 10 percent interest. Once they finally quit work, the pensioners collect. The program was created in 1993, ostensibly to give longtime officers who might otherwise leave the department a reason to stick around.
It's made millionaires out of many retirees -- 283, according to The Dallas Morning News -- but that wealth has come at a high cost to the city. With the massive losses police and firefighters suffered after the housing bubble burst in 2008, the plan became unsustainable. With a plan to lower DROP interest rates tied up in court, the pension plan's board elected Wednesday to shut down new DROP enrollments indefinitely.
"[DROP costs] more than $300 million a year in accrued liability to pensioners in the DROP program. There's approximately $1.3 billion in the DROP plan against a total system size of $3.4 billion," says City Council member Philip Kingston, who sits on the pension's board. "This DROP program, until we're able to pay it down through attrition or are given some kind of relief by the courts or Legislature, it is going to absolutely hamstring our ability to hire."
Last year, Kingston and the rest of the board created a plan to lower interest rates gradually using a sliding scale. Pensioners sued and state District Judge Tonya Parker ruled against the rate changes, saying they violated the Texas Constitution. The pension board appealed the decision, but a final ruling in the case could take years.
Ron Pinkston, president of the Dallas Police Association, told the News that shutting down enrollment in the program takes away one of DPD's most valuable recruiting tools.
"We've always had the lowest pay. Our health benefits are some of the worst in the state," Pinkston said. "But we had a great pension for a young recruit to hang his hat on coming to Dallas -- other than the ability to chase some of the worst criminals in the state."
The starting salary for a Dallas cop or firefighter is $42,941, one of the lowest rates in North Texas.
Kingston acknowledges that suspending DROP enrollments will affect recruiting, but says there was nothing the board could do.
"You're looking at a math problem there that absolutely bankrupts the system in not very many years. We had to close the system regardless of its effect on recruiting," he said.
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Dallas' major competitive advantage over departments in the region that might pay more are the benefits provided by Dallas' size and the size of the police and fire departments.
"It's a big city force. That's fundamentally different. If you want to be a real cop, you want to come to Dallas. You don't want, not to pick on them, but Grand Prairie just doesn't have the same opportunities for exciting crime fighting or technology and cutting edge tactics and training," he said. "It must be true that if we're offering a worse package it's going to hurt our recruiting, but I think the much bigger issue on recruiting is that the DROP program, uncurtailed, will continue to incentivize senior staff to stick around, reducing our ability to recruit. We can only spend so much money on DPD."
Without being able to lower the interest rates guaranteed by DROP, it is hard to see enrollment in the program being reopened, Kingston said.
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