This Is a Fix for the Dallas Police Pension We Should All Get Behind

Fixing a broken pension is a zero-sum game with high stakes, intense emotions and no guarantee of success. So give credit to leaders in Dallas and Austin for hammering out a compromise to save the Dallas Police and Fire Pension.While still in progress, the months-long effort has accomplished a lot. As proposed, the pension fix would preserve key benefits for retirees and keep the valuable retirement program in place for young officers and future hires. The plan doesn’t require a tax increase, a top priority for city leaders, and could improve Dallas’ negative credit outlook.We support the rescue as outlined in HB 3158, although more work lies ahead. Lawmakers in Austin should strengthen the proposal, especially on clawbacks. And when the bill reaches the Senate, they should consider tacking on the back pay case with Dallas police and fire, another potential financial crisis.The pension bill, filed by Rep. Dan Flynn, R-Van, is scheduled for an early April hearing. The most contested issue is whether the fund can recover, or "claw back," excessive gains already awarded to police and firefighters in its deferred savings program. The Deferred Retirement Option Plan, or DROP, allowed members to retire on paper and continue working, depositing their pension checks into accounts earning high guaranteed returns. For years, they promised interest rates of at least 8 percent, far above the fund's actual returns. Under clawbacks, those gains would be reduced, perhaps by half or more. Just over 3,000 workers participate in DROP, with the average account worth almost $600,000. More than 500 accounts top $1 million.DROP added roughly $1 billion in unfunded liabilities to the pension plan.The case for clawbacksFlynn’s bill doesn’t order clawbacks but gives the next pension board the latitude to pursue them later. So trustees could take the many other steps to improve the fund, as agreed upon, and see whether more moves are needed later. Pension leaders and members believe it’s illegal to claw back any DROP assets. The city argues that DROP’s high returns are not constitutionally protected like monthly retirement payments are. If the fund eventually goes after the money, as expected, the case will head to the Texas Supreme Court; the proposal calls for an accelerated timeline to get there.We agree with the city’s stance on clawbacks — first, because the money will probably be needed to make the pension fiscally sound, and second, because it’s a more equitable sharing of the sacrifice. Otherwise, Dallas taxpayers and younger police and firefighters would shoulder most of the new burden while a tier of older workers and retirees get the most benefits.   Continue reading...

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