Report: If contributions don’t change Austin will never pay the debt on police pension

The police pension fund for the city of Austin will run out of money in fifty years, according to city actuaries and consultants overseeing the fund.

AUSTIN (KXAN) — The police pension fund for the city of Austin will run out of money in fifty years, according to city actuaries and consultants overseeing the fund.

Consultants Ryan Falls and Lewis Ward wrote a report in July to the Board of Trustees for the Austin Police Retirement System warning the city and police officers, “the current contribution rates are not sufficient to support the benefit structure of the System.”

What could alarm pension watchers more is if the city of Austin never pays off the debt on its police pension system, according to the report.

“The current contribution rate is not expected to amortize the unfunded liability over any amortization period,” staff wrote. Amortization is the process of paying off the debt so in laments terms staff believes that with current contributions rate the city program will always be in debt.

“There is no immediate danger of the System not being able to meet its benefit payment obligations. However, the dialogue with the city should begin sooner rather than later in order to ensure that any necessary changes are incorporated during the 2021 legislative session,” they wrote.

2018 was not a good year for the fund investments, increasing unfunded liabilities approximately $153 million. The major drivers of that change were: the funds expected investment returns shrank from 7.7% to 7.25%, salary increases were modified, administrative expenses were added, and the consultants expect retired officers to live and draw from the fund longer.

“Our pension system compared to other big cities is one of the better ones,” said Austin Police Association President Ken Casaday, “There were some investments we’ve made a few years back that have hurt us. That we’re trying to get out from underneath.”

Casaday expects City Council to dig deeper into it after they tackle the current homelessness crisis and land development code revamp.

“We could add more money to it. We could change the benefits. There are lots of different things we could do to make the pension better than it is today,” said Casaday.

The stakes are high and questions remain: will this hold up new officers APD wants and will the Austin critics in the Texas legislature step in?

Austin Mayor Steve Adler says the problem exists but isn’t immediate. “The Fund has challenges and we have the time to address them,” said Adler.

The report also points to another factor in driving costs. The age group that takes out the most money from the fund is the youngest. 345 people retired and tapped into it are younger than age 60. On average, those retired officers draw around $70,000 each.

Currently, members contribute 13% of total payroll to the fund; the city of Austin contributes 21.31%. All of this expanded the pension’s unfunded liability from $406 million in December 2017 to $582 million a year later.

“The good news is that we now have the most reliable information upon which the Board and the City can plan for improvement. The City has shown historical support for its three retirement systems, and has recently assured of its continued commitment to help address the APRS situation,” wrote Pattie Featherston, the Executive Director of the Police Retirement System to KXAN via email, “We will work diligently with the City and all of our stakeholders to secure a resolution for the current funding status. It’s too soon to tell exactly what changes may be put in place.”