Friday, December 9, 2016

Pension Armageddon in Dallas

What is taking place right now in Dallas is nothing short of a pension Armageddon.   The Dallas Police and Fire Pension System invested in risky real estate deals, including a swanky 200 condo development in downtown Dallas at the height of the housing meltdown. Retirees have withdrawn well over a half a billion dollars from the system as they fear its imminent collapse.  The Dallas Morning News reported yesterday:

The Dallas Police and Fire Pension System's Board of Trustees suspended lump-sum withdrawals from the pension fund Thursday, staving off a possible restraining order and stopping $154 million in withdrawal requests.

The system was set to pay out the weekly requests Friday. Pension officials said allowing the withdrawals would leave them without the liquid reserves required to sustain the $2.1 billion fund.

"Our situation is currently critical, and we took action," board chairman Sam Friar said.

Pension officials and many police and firefighters have blamed Dallas Mayor Mike Rawlings for forcing the latest run on the bank. Dozens of retirees rushed to request withdrawals after Rawlings filed a lawsuit Monday to stop the withdrawals.

By then, more than $500 million had already gushed from the fund since the board proposed benefit cuts in August....

Council member Philip Kingston, a board trustee, said the mayor "unquestionably" forced the pension board's hand. He said Thursday was "the worst day I've had in public office."

"Unfortunately, financially, this had to happen," he said.

Kingston said the tough decision will be worth it if it means the pension, which is hurtling toward insolvency within the next decade or so, can be saved.

On Wednesday, the city officially unveiled its plan to save the fund. The biggest target was the lump-sum program officially called the Deferred Retirement Option Plan, or DROP.....

That plan, originally intended as a retention perk for veterans, made hundreds of officers, firefighters and retirees into millionaires. DROP allowed them to retire on paper, continue working and meanwhile defer their pension benefit checks into a separate account. Once they actually retired, they could remain in DROP and continue deferring their checks.

For years, DROP guaranteed at least 8 percent interest on the money. That hurt the entire fund when the investment returns couldn't keep up. The problem was made worse when the pension's current administration revealed that their predecessors had significantly overvalued risky real estate investments.

The city proposal would wipe away the DROP interest over the years. literally wiping it away from existing DROP accounts or adjusting future monthly benefits for those who already took their money out.

Kingston had declined to comment on the plan Wednesday. But on Thursday, he called the city's plan "Draconian." But so is the pension system's request for a $1.1 billion taxpayer bailout, he said.

Both taxpayers and police and firefighters will have to share in the pain, he said.

But as the discussions about a fix continued, the pace of DROP withdrawals threatened to weaken the fund even further. While the money going out reduced future liabilities, the pace could have forced the system to sell off its assets....

The fund has about $729 million in liquid assets. It needs to keep about $600 million on hand, meaning the restrictions could have been coming at some point even without the mayor's actions. The withdrawal requests this week alone would have meant the fund would dip below that level.... Rest of article

About that $1.1 billion bailout.  The New York Times reported in November:

Dallas has the fastest economic growth of the nation’s 13 largest cities. Its streets hum with supersize cars and its skyline bristles with cranes. Its mayor is a former chief executive of Pizza Hut. Hundreds of multinational corporations have chosen Dallas for their headquarters, most recently Jacobs Engineering, which is moving to low-tax Texas from pricey Pasadena, Calif.

But under its glittering surface, Dallas has a problem that could bring it to its knees, and that could be an early test of America’s postelection commitment to safe streets and tax relief: The city’s pension fund for its police officers and firefighters is near collapse and seeking an immense bailout.

Over six recent weeks, panicked Dallas retirees have pulled $220 million out of the fund. What set off the run was a recommendation in July that the retirees no longer be allowed to take out big blocks of money. Even before that, though, there were reports that the fund’s investments — some placed in highly risky and speculative ventures — were worth less than previously stated. 

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.

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. Rest of article.

Simply put, there is no easy way out for Dallas.

 This story is exactly why JJ covers the Mississippi Public Employees Retirement System.  The combined obligations are $42 billion and some change.  The assets are around $25 billion.  It is literally the biggest piece of finance in Mississippi- public or private sector.  It is too big to ignore yet that is exactly what the media and politicians do.  It is important that people know what is going on with PERS so that what is taking place in Dallas right now never happens here.


Anonymous said...

I saw this article this morning. This is exactly what will probably start happening to PERS once a few realize it is heading the same direction.

Get it while you can!

Anonymous said...

Drain it to zero.

Start over with real numbers.

Anonymous said...

If taxpayers allow the "one time" infusion they can be guaranteed that the "one time" will happen many times.

Pensions are in trouble nationwide (public and private). Between the coming pension crisis, the student debt problem and the overall financial health of most states and cities being on life support, you can get ready for taxes to skyrocket. That's the only way this shit can be paid for.

Anonymous said...

PERS members should take note what happens when unaddressed PONZI shortfalls go bad. Like in Dallas plan trustees impair plan participants and retirees.

If PERS members don't rise and demand legislative reform of PERS they've got nobody to blame for their haircuts but themselves.

It surely won't be for lack of warning.

Anonymous said...

Many work for the state and take a lower salary because of the retirement plan. There is no doubt in my mind that the state leadership plans on stiffing the state employees. This includes teachers, city/county police officers, firemen, university employees etc etc.

It would be like a company hiring someone and promising a big commission and then not paying it after the sales are made, except we are talking about a career and not just a short time frame.

Anonymous said...

"Many work for the state and take a lower salary....". Big assumption there pal. You are assuming a bid war for their services. Good laugh there!!!

Anonymous said...

Correct me if I'm wrong, but this is somewhat different than the problems with PERS.

I believe Dallas's DROP system is on top of its basic pension system, essentially allowing retirees to keep working and roll money they already are due back into the system on the promise of a huge payout later. Basically, it says "Keep working and let us hold on to your payout a little longer, and it'll be even bigger."

I'm fairly certain PERS has no analogous system. It's just a straightforward defined benefit plan that doesn't allow you to withdraw early or double down after retirement. And it doesn't guarantee any rate of return, unlike DROP.

So while I strongly agree that PERS is in need of reform, suggesting that the Dallas situation is a harbinger of the future for Mississippi seems a little misleading.

Chicken Little Has Spoken.. said...

Retirees in Mississippi under PERS cannot just willy-nilly decide to withdraw lump sum amounts from the system. That is a YUUGGE difference (in Trump's language). The only lump sum part of the Mississippi PERS system occurs at the time of retirement when an option is available to the first time retiree. This in no way compares to the Dallas system.

No comparison, no analogy, no way to compare PERS to DROP. But thanks for sounding your usual alarm Kingfish. This is about twelve times in four years you've done it.

Now, go ahead and blow your farking stack and lambast posters for commenting and daring to contradict your bullshit.

Anonymous said...

Massively underfunded obligations. Nothing misleading about that comparison and it ain't no bullshit. Go place your head back in that hole @5:37 and dream about growth rate assumptions that will never happen in your lifetime. Everyone takes a hit, PERS folks included.

Kingfish said...

No one claimed PERS is structured as the system in Dallas or as some of the crazier ones in California. The point is to show what happens when these things are ignored. The Dallas system is now suffering an implosion. It's sad that I have to post this because some such as our reader at 5:37 like to lie and distort when I write about PERS. Notice he never debates actual facts in previous comments but instead just attacks me, name calls, and says no one should even look at PERS.

Dallas is an example of what happens when questions aren't asked and everything is allowed to continue as it is. 5:37 doesn't even think it warrants discussion.

Anonymous said...

Dallas may be in trouble, but all is fine in Missippi. we can pay our coaches 4.5 mil to go 5-7, and give some of them raises and extensions.

Ghost of Dudy Noble.. said...

Most of the money used to pay coaches is from private donations. In a discussion of apples, why do you insist on mentioning transmissions?

Anonymous said...

9:54, Maybe apples and transmissions but you can see why Ms. is always on the bottom of the education ladder. People will donate money to pay a coach but will not voluntary spend a penny for a teacher. It shows what they care about the most and it isn't education.

Chicken Little Has Spoken And Owns The Censor-Radar.. said...

I responded to the Fish but he decided my post was a bit too insulting, or rather it highlited his idiocy. Let me try again. This one won't see the light of day either.

King posted this: "It's sad that I have to post this because some such as our reader at 5:37 like to lie and distort when I write about PERS. Notice he never debates actual facts in previous comments but instead just attacks me, name calls, and says no one should even look at PERS."

First; I've lied about nothing. It's well known that 'your humble correspondent' has for at least six years thrown all this crap against the wall in an attempt to incite while never wanting to discuss solutions. He loves a failed system since it makes headlines and ramps up the blog-posts.

Second; I've 'lied' about nothing. If I have, post an example.

Third; I've never suggested "nobody should look at PERS". I've sat in at least thirty PERS meetings hoping to learn more about the system. I'm all for making the system work. I've never suggested nobody should look at PERS. But, there's a vast difference between 'looking at PERS' and constantly mimicking Chicken Little. Again, if 'your humble correspondent' has an example of my suggesting 'nobody should look at PERS', let's see him post it.

Let's get to solutions and move on from the hype, hyperbole and poor analogies.

"Start your own blog" in 3...2...1...

Anonymous said...

Don't know that much about DROP, but Mississippi PERS has for decades had the additional Deferred Compensation plan that works sort of like a 401(k). I'm unclear as to whether or not that resembles DROP. But, Mississippi PERS Deferred Comp plan has no affect on the strength or weakness of the basic PERS retirement system.

But I can assure you that retirees under PERS can NOT withdraw lump sums and 'raid the bank'. So, there's that.

Meanwhile, there's another retirement plan somewhere up in Minnesota that's also got unrelated, dissimilar problems that can be compared to PERS (not).

Anonymous said...

What if they come up with a plan to allow this sort of thing to "save PERS". I don't get how participants in PERS continue to hide their heads in the sand and continue to place faith in those who are running it into the ground from an investing standpoint. It is going to be sad when the roosters show up.

Anonymous said...

'Hide their heads in the sand'? You do realize who makes decisions that affect PERS don't you? A state employee has no voice in this matter. They have the opportunity to elect a representative occasionally, but that's window dressing. A few guys at the top of the government pyramid and the legislature are the rule makers, but their primary interest is personal.

Just as Epps pretended to be concerned about prisoners and the prison system, Bryant and Tater give lip service but don't give a hoot in hell about state employees other than themselves and their own enrichment.

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Trollfest '09

Trollfest '07 was such a success that Jackson Jambalaya will once again host Trollfest '09. Catch this great event which will leave NE Jackson & Fondren in flames. Othor Cain and his band, The Black Power Structure headline the night while Sonjay Poontang returns for an encore performance. Former Frank Melton bodyguard Marcus Wright makes his premier appearance at Trollfest singing "I'm a Sweet Transvestite" from "The Rocky Horror Picture Show." Kamikaze will sing his new hit, “How I sold out to da Man.” Robbie Bell again performs: “Mamas, don't let your babies grow up to be Bells” and “Any friend of Ed Peters is a friend of mine”. After the show, Ms. Bell will autograph copies of her mug shot photos. In a salute to “Dancing with the Stars”, Ms. Bell and Hinds County District Attorney Robert Smith will dance the Wango Tango.

Wrestling returns, except this time it will be a Battle Royal with Othor Cain, Ben Allen, Kim Wade, Haley Fisackerly, Alan Lange, and “Big Cat” Donna Ladd all in the ring at the same time. The Battle Royal will be in a steel cage, no time limit, no referee, and the losers must leave town. Marshand Crisler will be the honorary referee (as it gives him a title without actually having to do anything).

Meet KIM Waaaaaade at the Entergy Tent. For five pesos, Kim will sell you a chance to win a deed to a crack house on Ridgeway Street stuffed in the Howard Industries pinata. Don't worry if the pinata is beaten to shreds, as Mr. Wade has Jose, Emmanuel, and Carlos, all illegal immigrants, available as replacements for the it. Upon leaving the Entergy tent, fig leaves will be available in case Entergy literally takes everything you have as part of its Trollfest ticket price adjustment charge.

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In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.

In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

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Relax at the Fox News Tent. Since there are only three blonde reporters in Jackson (being blonde is a requirement for working at Fox News), Megan and Kathryn from WAPT and Wendy from WLBT will be on loan to Fox. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both and a torn-up Obama yard sign will entitle you to free drinks served by Megan, Wendy, and Kathryn. Get your tickets now. Since this is an event for trolls, no ID is required. Just bring the hate. Bring the family, Trollfest '09 is for EVERYONE!!!

This is definitely a Beaver production.

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Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

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