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Failing Dallas, Texas Pension Fund Prompts Mayor’s Call for Criminal Investigation

January 21, 2017

Dallas, Texas Mayor Mike Rawlings (D) is requesting a criminal investigation of the city’s government pension fund program after the government employees’ union rejected reforms proposed to rescue the fund from insolvency.

Dallas, Texas Mayor Mike Rawlings (D) is requesting a criminal investigation of the city’s government pension fund program after the government employees’ union rejected reforms proposed to rescue the fund from insolvency.

Rawlings announced on December 30 he had asked the state government’s law enforcement agency, the Texas Ranger Division, to investigate the city government’s pension board.

In a press release, Rawlings said the pension board has “committed a grave breach of trust with our first responders with serious ramifications,” alleging past criminal activity led to the pension fund’s current situation. In 2016, federal law enforcement agents obtained search warrants to investigate CDK Realty Advisors, an investment company doing business with the government pension program.

Earlier in December 2016, members of the Dallas Police & Fire Pension System rejected proposed changes to the pension fund, including increasing employee contributions and reduced inflationary benefit adjustments. The pension board is also asking lawmakers to approve a $1.1 billion bailout from city taxpayers, to stabilize its funds.

Taxpayer Bailout Wanted

James Quintero, director of the Center for Local Governance at the Texas Public Policy Foundation, says the Dallas city government’s pension system is unsustainable in its current form.

“Dallas’ pension fund wants a billion-dollar bailout to abate a liquidity crisis and give the impression that things are moving in the right direction,” Quintero said. “Not only is its request excessive, but it’s also shortsighted. Even if the pension fund forced Dallas-area homeowners and businesses to accept much higher taxes to pay for the bailout, this move would do little more than kick the can down the road. Real reform demands long-term structural changes to make this fund sustainable and affordable.”

Quintero says Dallas isn’t the only Texas city government with pension problems.

“Texas’ defined-benefit pension plans are underfunded and overpromised, putting taxpayers and retirees at risk of higher taxes, reduced benefits, or some combination of both,” Quintero said.

“To protect Texans’ pocketbooks and retirement plans, officials need to rethink public pensions. Specifically, policymakers should cease offering the defined-benefit model to new public employees and instead shift workers to a more sustainable and affordable alternative, like a defined-contribution system.”

A defined-benefit pension plan guarantees employees a pre-set benefit amount upon retirement. A defined-contribution plan, similar to a 401(k) retirement plan, gives retirees direct control over their retirement fund, allowing them to change jobs without losing their accrued pension benefits.

‘True Extent’ Unreported

Bill Bergman, director of research at Truth in Accounting, a nonprofit organization dedicated to promoting transparent government financial reporting, says the pension problems in Texas are worse than many people may suspect.

“Most taxpayers and retirees don’t understand the true extent of Texas’ pension problems,” Bergman said. “If they did, they’d be lining up at the State Capitol to demand to know how officials intend to address Texas’ $63 billion in unfunded pension liabilities.”

Bergman says lawmakers’ lack of honesty with taxpayers is the root of the problem.

“With all due respect to taxpayers, another group of people deserve consideration here: the people the taxpayers, and citizens generally, chose to represent them,” Bergman said. “Public officials have been responsible for the deterioration in the plan, and taxpayers and citizens were responsible for putting them there. Government financial reporting and accounting standards were a key enabler for kicking the can down the road, and taxpayers and citizens were not as well informed as they should have been.”

Author
Dustin Siggins (dustinsiggins@gmail.com) writes from Washington, DC.