Fort Worth taxpayers could be looking at pumping tens of millions of dollars more into the city’s employee pension fund if changes are not made soon and before the fund runs out of money, city leaders learned Tuesday.
In a joint meeting of the Fort Worth City Council and the Fort Worth Employees Fund Board, members learned the magnitude of the issue when financial reports prepared by independent actuaries for the fund and the city showed how the fund is struggling. The city’s consultant said the fund could run out of money in as early as 20 years, depending on investment returns and if no changes are made.
“You have a problem. This plan is not sustainable without changes,” said Paul Schrader, a consultant with Philadelphia-based PFM Group Consulting, hired by the city in May. “The changes are benefit changes or they’re contribution changes or a combination of the two. It’s going to be very difficult for the plan to survive under the current situation.”
In 2017, taxpayers paid $89.9 million toward the pension, while employees contributed $35.1 million, for a total of $125 million, or about 28 percent of the city’s payroll. To meet the shortfall, that contribution needs to grow to 36 percent. The city’s payroll is about $440 million.
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If taxpayers are saddled with the 8 percent shortfall, that could mean about $40 million more annually, equivalent to 4 cents to 5 cents on the property tax rate. The unfunded liability is the amount of benefits promised to employees and retirees, but no money to cover it.
About six years ago, city leaders began addressing the pension issues and put it on a course of solvency, but those fixes cannot fix the past investment decisions.
“It’s a significant issue,” Mayor Betsy Price said Tuesday. “All of that will have to go before council and before our employees, both the the labor groups and our general employees. This will be a solution that will take some creative minds working on it and some give and take from both. The hope for council has always been that we won’t have to put more on the citizens.”
In December, Fort Worth reported its pension liability at $3.4 billion. In the past several years, the fund has not hit projected rates of return on its investment, which has resulted in the increase in the unfunded liability.
Ryan Falls, the fund’s actuary, said that based on current contributions and projected returns, the fund could run out of money by 2050.
“You have a gap that needs to be closed,” Falls said. “There’s going to have to be a restructuring of how the plan is funded.”
A city manager task force on the pension issue is scheduled to meet Nov. 21 to begin hearing recommendations.
City employees will get a vote on whether they want to increase their contributions. It might not be until April or May before the City Council approves a plan.
The city has about 6,300 active employees and more than 4,100 others receiving pensions.