Dallas Mayor Mike Rawlings has finally reached his maximum willingness to throw taxpayer dollars at the Dallas Police and Fire Pension (DPFP) system and has pulled is support for a bill that, if it passes, will undoubtedly prove to be yet another futile effort to save the system from insolvency. Despite support for the original legislation introduced by Dan Flynn, chair of the pensions committee in the Texas House of Representatives, Rawlings apparently took issue with a last minute addition to the bill that would have taxpayers fund the pensions of “phantom employees” based on a target Dallas police force of 3 officers per 1,000 residents. Per ABC:
The clause sets a baseline number of officers and firefighters. In the case of police, that’s three officers per thousand. The clause would also automatically assume that a certain level of raises given.
“Basically you’re paying on phantom employees, not real employees,” Rawlings said. “We just can’t enter into an agreement with that degree of commitment for the city. No business would do it this way. We cannot find another pension fund in American where someone pays into a fund based on future employees. It’s just not done and it should not start here in the State of Texas.”
“This is the most taxpayer unfriendly poison pill that I’ve seen in this bill,” he said. “I’m not going to swallow this pill.”
Frankly, not wanting to spend taxpayer dollars to fund the pensions of officers that don’t even exist just seems selfish, Mike!
As we reported previously (see “Dallas Police Pension Board Approves Benefit Cuts; Asks For More Taxpayer Money To Avoid Collapse“), legislation to save the DPFP was introduced a couple of months ago by Dan Flynn. Flynn’s bill called for Dallas taxpayers to contribute 34.5% of police and firefighter salaries each year into the failing pension system, up from 27% in 2015, plus an incremental $11 million per year. In total, the adopted plan was expected to cost Dallas taxpayers an extra $22 million per year.
That said, the plan also called for pensioners to grant concessions, including the following:
- Increase in retirement age to 58 from 55
- Increase in employee contributions to 13.5% of payroll from 8.5%
- Elimination of COLAs in the near term
- Elimination of exorbitant interest payments made on employees DROP accounts
Of course, Flynn was appalled by Rawling’s opposition to funding the pensions of fake employees and took to twitter to blast his decision.
“I am deeply disappointed that the Mayor is not in support of the Legislation that will save the Dallas Police and Fire Pension. Dallas’s own website says how much they are committed to provide and now they back out over a provision that has always been in the bill since the day it was filed and want to hurt families more. I simply won’t allow it. 10,000 Police and Fire retirees and active members and their extended families will be damaged by this stance and we hope the Mayor thinks better of it.”
On the eve of public hearing, Dallas Mayor has changed his mind on support of bill to bring about Actuarial Soundness, to maintain plan.
— Danfromvan (@Dan_Flynn) April 2, 2017
Meanwhile, Rawlings also expressed opposition to the current governance set out in the bill as it gives 50% control to the city and 50% to public safety workers.
“The thing that’s really concerning to me is that retirees say Dallas promised us this money, ‘give it to us,’” he said. “Dallas didn’t promise the money and if you want us to own the problem,… Dallas needs to have the right governance to do that.”
He noted that when he first became mayor in 2011, he sought to have the pension fund audited in the face of questions about the financial stability of the fund.
“They said you have no legal authority to do that,” he said.
The mayor and the city’s position is that police and firefighters voted themselves excessively generous benefits, and that the fund’s leadership hid the extent of the fund’s troubles from the membership for years.
But don’t worry dear pensioners, we’re sure you’ll end up getting your taxpayer funded bailout…after all, there is no problem too large for taxpayers to solve.
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For those who aren’t familiar with the DPFP fiasco, here is some background on how it ended up in its current predicament.
Just over a month ago we wrote that the Dallas Police and Fire Pension Fund was on the verge of collapse after a series of shady real estate investments resulted in massive markdowns of pension assets, the ouster of the fund’s CIO and an FBI raid of the fund’s largest real estate investment manager (see “Dallas Cops’ Pension Fund Nears Insolvency In Wake Of Shady Real Estate Deals, FBI Raid“). We summed up the fund’s dilemma as follows:
The Dallas Police & Fire Pension (DPFP), which covers nearly 10,000 police and firefighters, is on the verge of collapse as its board and the City of Dallas struggle to pitch benefit cuts to save the plan from complete failure. According the the National Real Estate Investor, DPFP was once applauded for it’s “diverse investment portfolio” but turns out it may have all been a fraud as the pension’s former real estate investment manager, CDK Realy Advisors, was raided by the FBI in April 2016 and the fund was subsequently forced to mark down their entire real estate book by 32%. Guess it’s pretty easy to generate good returns if you manage a book of illiquid assets that can be marked at your “discretion”.
The rampant fraud at the DPFP left the fund over $3BN underfunded and its board of directors with no other option but to seek a $600mm infusion from taxpayers to keep the fund afloat. Even worse, a review of the pension’s financials revealed $2.11 of annual benefit payments to members for every $1.00 contributed to the plan by members and taxpayers (mostly taxpayers)…the typical pension ponzi whereby plan administrators borrow from assets reserved to cover future liabilities (which are likely impaired) to cover current claims in full.
Well, it seems as though Dallas police officers are catching on to the ponzi and rushing to withdraw retirement funds as quickly as possible before the whole system goes bust. As reported by a local ABC affiliate, Dallas police officers are retiring at a record rate and opting for full cash withdrawals of their pension benefits as opposed to equal monthly distributions for life (apparently they don’t think the fund will be around long enough to pay them for very long).
But the pension fund is in trouble and in danger of going bankrupt. That’s causing some officers and retirees to begin withdrawing their retirement funds and rolling it into their 401Ks.
News 8 has learned a that one assistant chief recently withdrew more than $1 million, and sources say nearly $300 million has been withdrawn throughout the department.
“We are in a serious situation and I think everyone needs to be concerned right now about where we are and where we need to go to get out of this.”
DPFP board chairman, Sam Friar, was apparently worried enough about the “run on the bank” exposing the pension for the ponzi scheme that it is, that he decided to send a letter to members urging them to “not act rashly and without full information.” The pension board also voted to stop allowing current police officers to withdraw the cash value of their pensions and are considering further measures that would also restrict withdrawals by retirees.
The panic that has set in forced the chairman of the pension board Sam Friar to issue a letter to members.
“I would strongly urge all members not to act rashly and without full information,” he wrote. “You may make decisions that, after all the changes are made, are not in your best interest.”
The board was so concerned it voted to stop current officers from withdrawing any money from their pensions, and sources say the board will soon vote to no longer allow retirees to take their money out.
“This may be the only way the pension can limit the cash outflow because we are in a bad situation that right now the existence of system is at stake.”
Alas, the threats to restrict withdrawals of retirees probably didn’t work out the way Friar expected as it has set off a wave of early retirements. According to NBC, for the first two weeks of September, 21 Dallas police officers retired when only 14 retirements were expected for all of August and September.
Through the first two weeks of September, there have been 21 Dallas police officers who retired.
Multiple sources told NBC 5 that commanders are bracing for many more retirements over the next two weeks as well.
The Dallas Police Department did not foresee the volume of retirements this month.
In early August, Deputy Chiefs told city council members in a presentation that they projected 14 retirements between Aug. 9 and Oct. 1.
Alas, while Dallas police and fire fighters may endure some short-term pain, as their pension ponzi is revealed for all to see, we suspect that the real losers, as per the usual, will be taxpayers who will ultimately be forced to pony up whatever amount of money is required to keep the whole farce going just a little longer.