In an attempt to find a compromise that would be supported by both the City Council and employees, City Manager David Cooke rolled out a new proposal Friday to fix the city’s struggling pension fund.
The Fort Worth Employee’s Retirement Fund could run out of money by 2048 if nothing is done to address the $1.6 billion projected shortfall.
The proposal would increase the city’s contribution from $92 million to $110.7 million annually and preserve the cost of living adjustment (also known as a COLA) for retirees.
Employee contributions would increase from $37 million annually to about $50 million annually. Police and firefighters contribute at a higher rate than general fund employees.
But the leadership of both the Fort Worth Police Officers Association and the Fort Worth Professional Firefighters Local 440 said they couldn’t support this latest proposal because it would impact the cost of living adjustment for retirees.
Any change to the pension approved by the City Council still must pass an employee vote to go into effect. The City Council is scheduled to vote on a pension solution at its Sept. 18 meeting.
A majority of employees — not just those who vote in the election — must approve the changes.
If an employee vote failed, stabilizing the retirement fund would likely go to legislators in Austin.
“I don’t think we can pass this, move forward and fix it locally with what was proposed today,” said Michael Glynn, the firefighters association president.
Manny Ramirez, president of the police officers association, said the city needs to kick in more money to save the COLA. He is open to eliminating the COLA for any future service.
Both Ramirez and Glynn said they believe there will be plenty dialogue before the Sept. 18 meeting. And one council member, Cary Moon, suggested employees could kick in more money to save the cost of living adjustment.
“I think the majority of the City Council will do what their constituents value and keep promises that were made,” Ramirez said.
But if the city and employees were asked to kick in more money, as Ramirez suggested, some think general employees wouldn’t vote for the changes.
Glenn Balog, who represented general employees on the city’s pension committee and is a former trustee on the retirement board, said newer general fund employees would have little incentive to vote for the changes suggested by police and firefighters.
“Over 2,000 general employees have no COLA at all, “Balog said. “I just don’t see how you would get that vote.”
The city’s latest proposal may be about as good as it gets.
“My first reaction is I don’t like it but it’s the best compromise I’ve seen,” Balog said.
The city has 4,009 general employees with 2,082 hired since 2011. There are 1,710 police officers and 924 firefighters.
Under the proposal, the cost of living adjustment would drop from 2 percent to 1 percent for all retirees and eligible employees. No future service would be eligible for the cost of living adjustment.
General fund employees hired since July 1, 2011, police officers hired since January 1, 2013, and firefighters hired since January 10, 2015, are not eligible for the cost of living adjustment.
The city’s latest proposed pension recommendation also establishes a minimum retirement age of 55 for for firefighters and general employees.
Since no fix can guarantee the fund’s solvency, the city and employees could see their contributions increase if the fund is under performing. Under the latest plan, the city and employees would see contributions increased — up to 2 percent of pay — to make up 66 percent of the deficit. The other 33 percent would be reached through reductions in the cost of living adjustment.
If the fund is performing better than expected, there are options to increase the cost of living adjustment from 1 percent to 2 percent.
While upping its contribution, the city is still planning to keep its proposed 2-cent cut to the property tax rate.
To keep the 2-cent cut, Cooke is proposing to cut the $674 general fund budget by $3.4 million. Those cuts would not be found by the Sept. 18 budget vote. They would be identified over six to nine months. All departments would be asked to participate, Cooke said.
The proposed tax rate would drop from 80.5 cents per $100 valuation to 78.5 cents per $100 valuation. The owner of a home valued at $200,000 with a homestead exemption would pay $1,256.
Cooke has said the cut is needed to compete with other cities vying to attract new businesses.