Government to the Rescue, in Texas? The Public Sector May Finally Fix Dallas' Failing Police Pension

Here’s a nice surprise: The public sector is getting the job done, and in Texas, no less.Leaders in Dallas and Austin have worked out a compromise plan to fix the Dallas Police and Fire Pension. The fund has a hole of roughly $3.7 billion, which has created a financial crisis that threatens the retirement of thousands of workers and the future of the city.Dallas’ credit rating has already been downgraded, and a crippled pension makes it tougher to retain first responders. At some point, the soaring costs of public safety may also crowd out spending on streets, parks and libraries.So this proposed fix is a big deal for Dallas. If it succeeds, this could become a rare example of how to reform a complex underfunded pension. Many major companies, including Delta Air Lines and LTV Steel, had to use bankruptcy to break free from runaway pensions. And many cities and states have failed to resolve similar problems.While the Dallas plan still has far to go in the Legislature, there’s broad agreement on major changes and next steps. Those include virtually ending cost-of-living increases, cutting out the interest on deferred savings accounts, extending the retirement age and reducing the benefits formula.There’s also a provision that allows a new pension board to claw back the most excessive gains already credited to some accounts. A legal fight is certain to follow that action, and the bill provides for an accelerated trip to the state Supreme Court.  Continue reading...

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