Once in a while we like to distract ourselves with a bit of schadenfreude by examining public sector pension messes that make Colorado PERA’s look manageable by comparison.
Back in August, we wrote about the absurdly sweet deal firefighters and police in Dallas get from their pension fund, the Dallas Police & Fire Pension System:
A program called the Deferred Retirement Option Program (DROP), launched in 1993, allows Dallas cops and firefighters to ‘retire’ after 20 years, when fully vested in their pension fund, but to keep working. Their pension payments go into DROP instead of their bank accounts, Until now, DROP members were guaranteed an annual return of between 8 and 10 percent, even in years when the system itself earned far lower returns. What’s more, DROP members pay a fee totaling just 4 percent of their paychecks, while non-“retired” workers contribute 8.5 percent to their pensions.
Well, since then, things appear to have gotten worse. A lot worse. As The New York Times reported last week, the Dallas police and fire pension mess has the entire city teetering on the edge of bankruptcy.
Now, the Dallas Police and Fire Pension System has asked the city for a one-time infusion of $1.1 billion, an amount roughly equal to Dallas’s entire general fund budget but not even close to what the pension fund needs to be fully funded. Nothing would be left for fighting endemic poverty south of the Trinity River, for public libraries, or for giving current police officers and firefighters a raise.
How did this happen? The usual unmeetable promises from politicians, combined with some Texas-sized investment hubris, the Times reports:
What is happening in Dallas is an extreme example of what’s happening in many other places around the country. Elected officials promised workers solid pensions years ago, on the basis of wishful thinking rather than realistic expectations. Dallas’s troubles have become more urgent because its plan rules let some retirees take big withdrawals.
Some of the fund’s investments have gone into what the newspaper of record described as ” highly risky and speculative ventures” that have –surprise!– turned out to be “worth less than previously stated.”
There are many juicy details in the article, which we commend to your attention. Thanksgiving may be in our rearview mirrors, but we can be thankful we aren’t Dallas taxpayers.