- Joined
- Aug 26, 2007
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- San Antonio Texas
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- Conservative
DALLAS — Picture the next major American city to go bankrupt. What springs to mind? Probably not the swagger and sprawl of Dallas.But there was Dallas’s mayor, Michael S. Rawlings, testifying this month to a state oversight board that his city appeared to be “walking into the fan blades” of municipal bankruptcy.
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To many in Dallas, the hole in the pension fund seems to have blown open overnight. But in fact, the fuse was lit back in 1993, when state lawmakers sweetened police and firefighter pensions beyond the wildest dreams of the typical Dallas resident. They added individual savings accounts, paying 8.5 percent interest per year, when workers reached the normal retirement age, then 50. The goal was to keep seasoned veterans on the force longer.
Guaranteed 8.5 percent interest, on tap indefinitely for thousands of people, would of course cost a fortune. But state lawmakers made it look “cost neutral,” records show, by fixing Dallas's annual pension contributions at 36 percent of the police and firefighters’ payroll. It would all work as long as the payroll grew by 5 percent every year — which it did not — and if the pension fund earned 9 percent annually on its investments.
Buck Consultants, the plan’s actuarial firm, warned that those assumptions were shaky, and that the changes did not comply with the rules of the state Pension Review Board.
“The Legislature clearly ignored that,” Mr. Kleinman said. The plan’s current actuary, Segal Consulting, reported in July that 23 years of unmet goals had left Dallas with a hidden pension debt of almost $7 billion.
http://www.nytimes.com/2016/11/21/business/dealbook/dallas-pension-debt-threat-of-bankruptcy.html
I'd like to point out the Governor at that time was Democrat Ann Richards:
https://en.wikipedia.org/wiki/List_of_Governors_of_Texas
And at the time the House and Senate were Dem controlled:
https://en.wikipedia.org/wiki/Seventy-third_Texas_Legislature
I will give the NYTimes credit, they pointed out this started in '93. I hope people make that connection and start rejecting promises that are just too good to be true.
I leave you with the words, an understatement as big as Texas, by one of the fools that voted for this mess:
In his meeting with the trustees, Senator Whitmire recalled that in 1993 he had voted enthusiastically for the plan that sent the pension fund on its ill-fated quest for 9 percent investment returns.
“We all know some of the benefits, guaranteed, were just probably never realistic,” he said. “It was good while it lasted, but we’ve got some serious financial problems because of it.”