Courtesy of Mish.
Dallas is on the verge of bankruptcy due to untenable pension problems.
The Dallas police and fire plan is only 45% funded. Lump sum withdrawals have escalated, and it’s only a matter of time before such withdrawals are halted.
The fund needs a billion dollars in funding this year, the equivalent of the entire city budget, just to keep up with outflows.
Bankruptcy is inevitable. No one should be surprised.
Please consider Dallas Stares Down a Texas-Size Threat of Bankruptcy.
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.
Over six recent weeks, panicked Dallas retirees have pulled $220 million out of the fund. What set off the run was a recommendation in July that the retirees no longer be allowed to take out big blocks of money.
Now, the Dallas Police and Fire Pension System has asked the city for a one-time infusion of $1.1 billion, an amount roughly equal to Dallas’s entire general fund budget but not even close to what the pension fund needs to be fully funded.
“It’s a ridiculous request,” Mr. Rawlings, a Democrat, said in testimony this month to the Texas Pension Review Board, whose seven members are appointed by Texas governors, all Republicans for the last 20 years.
This month, Moody’s reported that Dallas was struggling with more pension debt, relative to its resources, than any major American city except Chicago.
“The City of Dallas has no way to pay this,” said Lee Kleinman, a City Council member who served as a pension trustee from 2013 until this year. “If the city had to pay the whole thing, we would declare bankruptcy.”
The city is expected to call for an overhaul in December. But it has no power to make the changes, because the fund is controlled by state lawmakers in Austin. The Texas Legislature convenes only every other year, and Dallas is preparing to ask the state for help when the next session starts in January.
Beset by Withdrawals
