How Do Dallas' Pension Fund Woes Affect the State? | KERA News

How Do Dallas' Pension Fund Woes Affect the State?

Dec 6, 2016
Originally published on December 5, 2016 3:37 pm

From Texas Standard:

After a series of bad gambles on real-estate investments and a history of mismanagement, the Dallas Police and Fire Pension system has amassed $2 billion in liabilities. In a panic, employees have been pulling out their money – a move that could potentially bankrupt the city.


But this isn’t only a problem for Dallas. Pension funds are causing problems nationwide. Texas State Comptroller Glenn Hegar says it’s not the first Texas city where this has happened. It’s also happened in Houston.

"Not enough money is coming in today to be able to pay the benefits out over time in the long run,” Hegar says. “Plus in today's investment environment, the last several years the assumptions of making 8-plus percent returns every year have not quite been there. So that causes even more of a problem."

Dallas’ and Houston’s problems could have an effect statewide, Hegar says, even though the money isn’t on the state’s balance sheets. The two cities’ credit ratings could get downgraded – which wouldn’t affect the state’s credit rating, but would still have an overall negative effect. Hegar says people might start shying away from moving to Houston or Dallas, two of the biggest economic engines in the state.

Houston is already working to amend the problem. One fix on Dallas’ table is a potential bailout from the state. Hegar says although that option is a long way off, if it were to happen, the request would not be well-received.

"There are 254 counties across the state of Texas. Those legislators representing places other than Dallas are wondering ‘Why should my taxpayers bail out problems in Dallas,’” Hegar says. “That's why it really needs to be dealt with. ... It is very critical and important that Dallas comes together with solutions ... so Dallas can move forward and move away from this cloud hanging over them."

Post by Beth Cortez-Neavel.

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