Its Time for Cities to Make Public Safety Pensions a Priority

By Chris Jones

We can’t dispute that governments have seen some hard times these past few years.   The economy has suffered and with it there has been less revenue for local governments to spend.  Tough decisions have been made.  In retrospect, some of those tough decisions were just illegitimate excuses/opportunities that cities had been waiting to use to change their public safety priorities and sock it to those in uniform.

Let’s be clear, CLEAT leaders are realistic when it comes to the issues surrounding the bad economy.  We have given back on many levels, especially in contract negotiations.  To avoid layoffs, we have given up benefits and deferred raises.  With regards to pensions, we realized that TMRS cities were facing huge contribution rate increases because of their unfunded liabilities associated with the current structure of the pension system.  We worked on the TMRS Advisory Committee to develop solutions that would alleviate the burden on our members cities.  We supported legislation that would restructure TMRS.  SB 350 was passed with our support and will significantly lower the contribution rates for TMRS cities and make them more stable from year to year.  For example, the average minimum city contribution rate will drop next year from 9.20% to 8.04%.  It will make current benefit levels more sustainable and will improve actuarial funding ratios.  What did CLEAT request in return for supporting this legislation?  Absolutely nothing because we felt it was the right thing to do in these tough economic times.

However, what we would not do, was support legislation that had the potential of cutting COLA benefits for employees in 458 Texas cities that have being paying for repeating COLA’s for years, even though it may have helped other cities reestablish COLA’s.  68% of all TMRS members are currently covered by annually repeating COLA’s. 

The Advisory Committee, which is made up of mostly representatives of cities and management, did not support a change to the COLA system this session either.  However, a few cities sought a change anyway, and we found ourselves in a battle to kill SB 642 by Senator Kel Seliger, R-Amarillo for the second time in four years.

The current TMRS COLA system was designed as a pay as you go plan to keep cities in the COLA system by requiring them to pay the contributions incrementally as they are provided.  It is a complicated system, but if a city adopts repeating COLA’s the idea was to penalize them if they dropped out by forcing them to catch up the COLA’s if they came back in.  It was a system supported by the Texas Municipal League (TML) and most cities when it was first adopted over 25 years ago.  It has kept the majority of the TMRS cities in the COLA system, even when newly elected city councils wanted to drop them to save money.  They stayed in because they knew if they dropped it would be very expensive to get back in. 

We believe that if the COLA system was changed where cities could opt in or out at will, then cities that had been paying for repeating COLA’s for years would no longer be forced into a position to do so and would drop out of the COLA system altogether.  City councils would then only offer a COLA when they felt like it and more likely they wouldn’t.

Another aspect of this COLA fight was that my boss, Charley Wilkison, offered a number of compromises that were rejected out of hand by Senator Seliger and TML. TML has now changed their position on supporting the current COLA system that they supported for years when the economy was great. Now they believe that cities should be able to do whatever they want with regards to COLA’s.  We suggested that cities be allowed to bargain over TMRS changes with police and fire in meet and confer agreements or bargaining contracts, where they exist.  We also agreed to allow a one-time opportunity for cities to get back into the repeating COLA system without having to pay the catch up provision.  Again, they did not want to compromise, so we were forced to oppose the bill outright.

So why this lengthy explanation of a complicated issue?  Well, now some cities want to blame us for their inability to provide COLA’s to their retirees.  They should accept responsibility for the fact that they didn’t make pension benefits a priority when they decided to cut COLA’s in the first place.  Now, with the passage of SB 350, cities liabilities will be lowered.  The economy is already starting to rebound and we have seen the returns achieved by TMRS investments grow substantially over the past year or so.  The actual rate of return for TMRS investments in 2008 was -1.3% with a three year average return of 2.4%.  In 2009 the annual return was up to 10.2% and the 3 year average was up to 5.5% and in 2010 the return was 9.0% with a three year average of 5.9%.  Also, at the end of 2010, TMRS’ funding ratio was at 82.9%, up from 75.8% in 2009. As you can see, TMRS has rebounded nicely from the decline the market suffered a few years ago. 

With that said, cities should remember the sacrifices public safety employees have made when times are hard.  Most public safety employees forego upfront salary and benefits for a decent retirement because we know that burn out due stress is a reality in this type of work.  Public safety employees put their lives on the line daily to protect their communities and a livable pension is not too much to ask for this dedication and service.   City and county officials need to make pension benefits and COLA’s a priority for public safety employees, especially when times are good and especially since we have been willing to make sacrifices when times are bad.

You get what you pay for and destroying the pay-as-you-go COLA system will create a world in which quality law enforcement applicants/officers flock to cities with a decent pension plan where the city leaders aren’t influenced by TML. In the mid-size and smaller communities that participate in the TMRS officers will suffer as the wealthy politicians and their hired help at TML decide what is best for those left behind in professional standards and benefits.

A key to understanding the hypocrisy of all these decisions is to know that TML employees are covered under TMRS. Yes, that’s right. The employees of TML who spend all their time fighting your union are enjoying the same benefits as you are without ever risking their lives or even coming to work as a municipal employee. These benefits reek of a huge double standard. It’s time for local unions to take off their gloves and correct some of these outright untruths that are being stated about public safety pensions and the brave men and women who EARN those benefits.

More information on the TMRS Fund Restructuring Bill, SB 350 can be found here:

http://www.tmrs.com/down/legislative/Fund_Restructuring.pdf

Source of the stats quoted in this article is the 2010 GRS actuarial valuation report for TMRS that can be found here:

http://www.tmrs.com/down/actuarial_valuation_2010.pdf