The Police and Fire Pension Fund has more than $3.5 billion in unfunded liabilities. There is a separate ongoing lawsuit about pay referendum, and an unfavorable ruling could cost the City another $4 billion and an annual cost of $330 million in the future. The two issues combined represent a potential $8 billion liability, which is the equivalent of the entire general fund budget for eight years. While not imminent, these costs could bankrupt the City.
Police and Fire Pay (Meet and Confer)
The City of Dallas has a new agreement in place for Police and Fire pay. Most uniform employees (57%) will receive at least a 25% increase over three years. The increased pay is needed to keep starting salaries competitive, but will add $89M per year to the City’s budget for Police and Fire pay, which is currently about $600M per year.
Pay referendum lawsuits
In 2005, the State of Texas called into question the City’s sovereign immunity by redefining how a city agreement can be made. The lawsuits from former and current Dallas police officers and firefighters alleges that the City should have to maintain a pay differential forever. The lawsuits could cost the City billions.
Dallas Police and Fire Pension (DPFP)
The State Legislature set up a flawed system that gave control to the members, but not the City, which contributes more than 80% of the money that goes into the DPFP. Police officers and firefighters voted themselves benefits and overly generous features (COLA, DROP interest, and Supplement) and diluted the City’s representation on the Board. The DPFP has features that could cost the Pension Fund (the City is not a guarantor) $6B. The Pension Board that manages the Pension is asking for nearly $99M more per year while taxpayers already contribute $124M per year. The City is asking for the State’s support in a new plan that preserves constitutionally protected benefits while redesigning the plan to be fair and sustainable. The State Legislature must allow the City, taxpayers and members to have veto power over plan changes; currently, only members have this ability. The City is prepared to provide more financial support to the Pension, but only if past overpayments of features are adjusted for long-term equity.