Local News15 Local Texas Pensions Are Less Than 50% Funded, Total $2.9 Billion in Unfunded Liabilities

Many local pensions in Texas, like others around the country, find themselves in troubling financial waters.
July 13, 2022
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Over a dozen local public pension funds in Texas have accounted for less than half of what they’ve promised pensioners, according to data from the Texas Comptroller of Public Accounts.

The 15 pensions have nearly $3 billion in unfunded liabilities — money promised but not currently accounted for in their current budget forecasts. The largest share of the unfunded liability total is the Dallas Police & Fire Pension System, which cannot account for $2.5 billion of promised benefits to its 10,836 members.

PensionFunded RatioAmortization Period (Years)Unfunded LiabilityUnfunded Liability Per MemberMembers
Paris Firefighters' Relief & Retirement Fund30.5%32.1$10,625,400$108,42298
Galveston Employees' Retirement Plan for Police33.95%30$38,211,442$115,095332
Plainview Firemen's Relief & Retirement Fund33.99%79.7$11,633,150$159,35873
Marshall Firemen's Relief & Retirement Fund36.66%59$12,576,960$135,23693
Odessa Firemen's Relief & Retirement Fund36.81%37.5$74,452,902$202,318368
Longview Firemen's Relief & Retirement Fund39.35%Infinite$68,367,542$211,011324
Brownwood Firemen's Relief & Retirement Fund42.75%94.7$5,975,941$103,03358
University Park Firemen's Relief & Retirement Fund43.36%28.75$13,664,013$175,18078
Dallas Police & Fire Pension System-Combined Plan45.73%55$2,563,846,869$236,60510,836
Texas City Firemen's Relief & Retirement Fund45.92%41.1$18,643,387$144,522129
Orange Firemen's Relief & Retirement Fund46.28%Infinite$9,241,746$118,48478
Greenville Firemen's Relief & Retirement Fund46.61%40.7$15,438,433$123,507125
Dallas Police & Fire Pension System-Supplemental48.3%20$18,523,051$102,906180
Lufkin Firemen's Relief & Retirement Fund48.81%30.7$18,178,233$135,658134
Abilene Firemen's Relief & Retirement Fund49.07%31.4$60,298,270$157,437383
Total$2,939,677,339$221,211.3313,289

The Dallas Police & Fire pension’s amortization rate — the length of time by which it’d take to pay off the current amount owed — is 55 years.

Litigation is ongoing by the pension fund against its former real estate investment firm, The Townsend Group, which is accused of costing the fund $1.2 billion due to poor investing advice.

The Texan Tumbler

The City of Paris’ firefighters pension fund is the lowest funded ratio at 30.5 percent, with over $108,000 owed to each of its 98 members.

Paris City Manager Grayson Path and Finance Director Gene Anderson issued a memorandum last month to the city’s mayor and council detailing the pension fund’s woes. 

“I learned that we are spending more annually on benefits to current retirees than we are bringing in through collection,” the letter reads.

“Under our current mode of operation, it is unlikely we will ever reach a fully funded status.”

Public pension systems have long been used as the competitive balance to the salaries private sector businesses can offer — what the state and local governments can’t pay in salary, they try to make up for on the back end with retirement benefits.

The problem pension systems run into is when the amount of money people are pulling out of the retirement fund exceeds what others are paying in. Social Security is beginning to see this problem more clearly. On top of the payee versus payer problem is the rising cost of living.

Paris’ firefighters pension fund pays beneficiaries about $34,000 per year, the same as all other firefighter pensions in the state, governed by the Texas Local Fire Fighters Retirement Act.

According to the memo, the pension is on track to pay off its current liabilities in 30 years’ time. But that does not account for growth in costs down the road.

“This will deter young men and women from considering a career as a Paris Firefighter,” the memo adds. “The growing unfunded liability will become more challenging for our future taxpayers to take on and address, particularly if an increase in benefits is ever approved, which could one day lead to the city’s having to make difficult decisions.”

The officials then propose moving future pension operations into the Texas Municipal Retirement System (TMRS) — a statewide conglomeration of local pensions that all pay into one pot, spreading out the cost burden across many different tax bases. TMRS is 88 percent funded and owes $4.3 billion to its nearly 250,000 members.

Moving under the TMRS umbrella would give the Paris pension more cushion. But that fund too has run into the exponential cost problem, increasing its employee and employer contribution percentages this past year. But what is currently owed now could not be shifted to the TMRS, and the city would have to take out a bond to finance it until the fund dissipates.

Anderson told The Texan that the fund’s problems stem from its tiny stature, fewer people paying in, and added that turnover within the fire department has caused issues — when firefighters leave for nearby localities, they take their sums with them.

Thirteen of the 15 low-funded pension funds are strictly for firefighters.

Galveston’s police pension has long been a sore spot for the coastal city. Back in 2019, the Galveston Municipal Police Association paid for a billboard that read “Home of the worst police retirement in Texas.”

Shortly after, the city reached an agreement with the police association to put the fund on a path toward solvency. The city increased its contribution amount to 18 percent while the association’s share would remain frozen at 12 percent.

“This will be the last time that you have this kind of hoopla or issue with the police pension,” Galveston City Manager Brian Maxwell said at the time. “This legislation sets it forward where nobody should have to touch this again. It’s going to move forward and that was the goal.”

But only a few years later, its unfunded liability total has grown $6 million.

Pensions are designed to provide a growing return by investing the payments in the market. But this also means that each fund is dependent on market trends to make up their financial promises — leaving each open to volatility, especially in the short term, that comes with any investment.

Many pension funds across the state and country are facing funding problems. The legislature changed the structure of the Texas Employee Retirement System (ERS) from a monthly benefit total in perpetuity to a capped sum for new beneficiaries. ERS is only 67 percent funded and has an “infinite” amortization period, hence the need for such a drastic change in operations.

Because of their stature, these local pensions face serious decisions — how to stop the financial bleeding, and then how to begin healing.

The state of public pensions in Texas is not as tumultuous as in other parts of the country, such as Illinois with its $533 billion unfunded liability total across its pension funds. But as the market takes a downturn, these struggling pension funds will face even more financial stress.

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Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.

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