Fort Worth, firefighters joust over pension in contract talks

Posted Friday, Aug. 30, 2013  comments  Print Reprints

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The city and its firefighters sparred over the pension Friday during their first public contract negotiations since April. The city says the association’s proposal to split the retirement fund and increase its members’ contributions has faulty financial assumptions and isn’t possible under state law.

Jim Tate, president of Fort Worth Professional Firefighters, said in an interview that “it’s a little disappointing when you step up to the table, offer to put in more money, offer to take more risk, and all they do is throw up roadblocks.”

Friday provided the first public look at the firefighters’ pension proposal. The association wants to separate the firefighter fund from the Fort Worth Employees’ Retirement Fund, leaving it for general and police employees.

Firefighters would increase their contributions, now at 8.25 percent of pay, by 4.39 points.

In exchange, the firefighters would keep their pension benefits formula.

Last year, the City Council made major changes to future pension benefits for general and police employees, seeking to close the pension’s now-$1 billion unfunded liability. It is seeking similar terms in its talks with the firefighters on a new contract.

The fire contract covers the pension, while the “ meet and confer” agreement doesn’t.

Assistant City Manager Susan Alanis told firefighters Friday that the assumed 8 percent annual rate of return in their pension proposal is still too high, even though they are dropping it from 8.25 percent.

The proposal also doesn’t address the pension’s variable cost-of-living adjustment, which the city is trying to phase out in favor of a fixed 2 percent guaranteed annual increase.

The variable adjustment is not figured into the city’s fund liability today, and the council and staff want to put the COLA on the books for a more accurate view of the fund’s finances in the future. Alanis called the omission a “fundamental” problem.

Firefighters are also seeking a pay raise in the contract talks — their initial proposal last year sought a 4 percent annual raise over the four-year term — that would diminish the value of their increased pension contributions, Alanis said.

Gerald Pruitt, a deputy city attorney, told firefighters that their proposal has significant legal flaws. Splitting the fund would expose the city to potential lawsuits over signing away other employees’ benefits, illegal under the state constitution, Pruitt said.

State statutes don’t allow the fund to be split. And under state law, all participants in the retirement fund — not just firefighters — would have to vote on the reduction of total dollars in the remaining fund for general and police employees, Pruitt said.

Tate said the legal issues aren’t insurmountable.

“With a lot of legal issues, it’s a matter of whether you want to get things done,” he said. “The city attorney is throwing up attorney general opinions like they were law. And they’re not.”

Vince Chasteen, president of the city’s general employees association, said he doesn’t oppose splitting the $1.9 billion pension fund. But he said that determining firefighters’ share would pose headaches and potential litigation and that the resulting two funds would be less efficient.

“It’ll probably be another one of those deals where they short-end the general employees,” he said in an interview. “It’s just standard operating procedure.”

The city puts 20 percent of payroll into the pension today. The staff and firefighters say the fire component probably amounts to 23 percent, based on factors such as service longevity.

The Fort Worth Police Officers Association has proposed a unified pension fund with separate accounting for the three employee groups.

“Right now, we have the advantage of a larger investment pool, so the risk is smoothed out a little more,” Sgt. Steve Hall, the police association president, said in an interview. “Without criticizing [the fire proposal], it would change the risk pool.”

Tate said the split makes sense because firefighters would be the only group putting more money into the pension. The police offered to raise their contributions last year, but the council rejected their proposal, saying it wasn’t effective enough in reducing the fund liability.

On the assumed rate of return, which the pension fund controls, city staffers have argued for moving closer to 7.5 percent, which they say is more realistic in today’s market.

The pension fund, using a mid-1980s baseline, quotes a lifetime average rate of return of more than 8 percent. But critics argue that the fund’s real returns are overstated, because the benchmark occurs before a significant market expansion. The fund uses an assumed rate of return of 8 percent.

The firefighters’ proposal represents a continuation of the duel between the city and the public safety associations over the variable cost-of-living adjustment, which pays as high as 4 percent in years when the number of years estimated to pay off the liability drops to a certain level. The variable COLA, which the city began offering several years ago, isn’t expected to pay off again for years.

Tate said the city should stick to the offer.

Scott Nishimura, 817-390-7808 Twitter: @JScottNishimura

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