The Fort Worth City Council got bad news Tuesday about the city employee pension fund.
So bad, in fact, that Mayor Betsy Price called it “a critical situation.”
She’s right — and the council has been down this road before. It’s a bumpy ride, extremely uncomfortable for City Hall leaders and employees alike.
It looks like what’s coming could be another severe test of wills similar to the one between the city and its workers, including bitter lawsuits, in 2012.
The council — mostly the same people who make up that body today — hung tough back then and instituted strong measures, even cutting pension benefits for future employee service.
Firefighters, who are covered by a collective bargaining contract, weren’t included in that original council action.
When the dust settled and the lawsuits played out, mostly to the city’s benefit, it even looked like the pension fund’s financial woes had been fixed — or at least significantly trimmed.
What at the time was an unfunded pension liability that would take more than 80 years to pay off was reduced under the new terms to a 55.7-year payoff by the end of 2014.
But the bad news Tuesday showed a reversal. The fund lost money in 2015.
The $748 million unfunded liability in 2012 rebounded to $1.3 billion at the end of 2015, requiring 72.5 years to pay off.
Star-Telegram writer Sandra Baker reported that nearly 30 percent of the city’s payroll goes to the pension fund in both city and employee contributions.
Joelle Mevi, the pension fund’s executive director and chief investment officer, said it may take an additional 5 percent in payroll contribution to close the current gap.
That would would reduce the unfunded liability payoff period to 30 years.
That’s good, but it’s bound to make the council members squirm.
Does that extra 5 percent come from the city or the employees?
During the 2012 discussions and since then, the council has been adamant that the city can go no higher in its contribution as a percentage of payroll.
The fear is that if the pension fund is allowed to suck in more in city contributions, that will squeeze the city’s ability to pay for services and address other major challenges.
To underscore that worry, Moody’s Investor Services downgraded the city’s bond rating this year, citing the pension liability.
There’s time to decide how to fix this, but it will require good communication, careful consideration and nerves of steel.