City Hall

Mayor Rawlings Warns Of "Fan Blades That Look Like Bankruptcy" Over Police and Fire Pension

Dallas Mayor Mike Rawlings sat in front of the Texas State Pension Review Board Thursday morning, arguing, he believed, for his city's continued existence.

"It is horribly ironic that a city that has enjoyed such tremendous success, a city that has made Texas so strong and so proud is potentially walking into the fan blades that look like bankruptcy," Rawlings said. "Shame on me, shame on you, shame on all of us if we allow that to happen."

The specter haunting Rawlings is the Dallas Police and Fire Pension System's multi-billion dollar unfunded liability, which, should it go unaddressed, could leave the pension fund bankrupt by 2030.

On Thursday, Rawlings reiterated the city's position to the review board, pushing back against claims from DPFP officials that the city needs to kick in about $1.1 billion in an effort to keep the fund solvent. Doing so, Rawlings said, would require the city to double its current general fund budget. That would necessitate the city raising property tax rates by 130 percent, he said.

"Every single city property owner in the city of Dallas would be hugely impacted by this increase," Rawlings said. "It's a ridiculous suggestion."

Kelly Gottschalk, the executive director of the DPFP, said that she believes the best option for the fund moving forward is for the city to pour more cash into the system. The system, she said, simply doesn't have enough tools to fix itself on its own when members are required to sign off on any money saving cuts to benefits — like the current proposals to make changes to the lucrative Deferred Retirement Option Program (DROP) which allows vested pensioners to keep working while their pensions continue to generate a high, guaranteed return. Officers withdrew more than $220 million from the DROP program in August and September amid growing fears that an agreement on benefit cuts would be reached.

"I think what we're doing, although we don't have a restriction on DROP, is working," Gottschalk said. "The members need confidence and they need trust. And right now, that's basically all I can give them."

The fund's lead attorney, Josh Mond, has said that he believes the pension benefits of the fund's members are protected by a 2003 amendment to the Texas Constitution. Late last year, then Dallas City Attorney Warren Ernst asserted just the opposite. "The city has made all contractually required contributions and has previously taken the position that it is not legally obligated to fund any additional amounts," Ernst said in December. "Contributions to the Police and Fire Pension System are governed by state statute. The contributions are dependent on the level of member contributions and are unrelated to unfunded accrued liability amounts."

Josh McGee, chairman of the review board, said that something must be done to end the standoff between the DPFP and the city before damage is done to the economy of the entire state.

"I fully share your desire to calm the nerves of retiree members that have the ability to withdraw on DROP, but this has a short-term effect on the state that's not good for anybody. I would hope that the city and the plan can move beyond this assigning of blame and stalemate that appears to be in place," he said.

Thursday's Pension Review Board hearing was held in advance of the 85th session of the Texas Legislature, which kicks off Jan. 10. Pushing legislation that would clarify the city of Dallas' obligation to the DPFP is expected to be one of the city's legislative priorities during the session.
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Stephen Young has written about Dallas news for the Observer since 2014. He's a Dallas native and a graduate of the University of North Texas.
Contact: Stephen Young