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On Friday afternoon, Dallas Mayor Mike Rawlings withdrew his request for a temporary restraining order barring the Dallas Police and Fire Pension System from making certain payments. Rawlings made it quite clear, however, that he has no plans to end his lawsuit against the system’s Deferred Retirement Option Program.
When it was open for enrollment, DROP allowed police and firefighters who’d served the 20 years necessary to guarantee a full pension to retire on paper but continue working. Those retirees’ pension checks would then be deposited in their DROP accounts as long as they were still working and the money would accrue interest at a guaranteed rate somewhere between 8 and 10 percent. As the fund’s problems — namely an unfunded liability of between $3 and $5 billion — have become apparent, DROP has become a symbol of the DPFP’s mismanagement.
DROP retirees began a run on the bank as concerns about the continued viability of the pension grew last year, withdrawing more than $500 million in a three-month span and, Rawlings’ suit alleges, threatening the overall liquidity of the fund. In November, just before Judge Tonya Parker decided on whether or not to stop DROP withdrawals entirely, the board voted to do so itself.
The next month, the DPFP board voted to allow pre-scheduled monthly payments from DROP accounts to begin again, while continuing to ban any lump sum or incremental withdrawals from pensioners’ accounts. Thursday, the board voted to allow DROP participants to withdraw up to $3,000 a month from their accounts, beginning March 31. The board also acted to void more than $200 million in pending DROP withdrawal requests.
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In doing so, Rawlings says, the board preserved the immediate viability of the pension — that’s why he’s no longer immediately seeking a restraining order. Nevertheless, Rawlings says, he’s still fearful for the board’s long-term health thanks to their decision to allow more withdrawals.
“The most immediate threat to the system has temporarily abated. Therefore, I am withdrawing my request for a temporary injunction hearing scheduled for Tuesday,” Rawlings said in a statement. “Unfortunately, because of the second component of the addendum, I cannot withdraw my lawsuit asking for a court order requiring the system to hold the assets of the system in trust, while preserving the monthly pension payments to our police and fire retirees.”
The fund’s leaders, needless to say, did not agree with Rawlings’ assessment of their actions and blamed the mayor, in part, for DROP’s current crisis. Any DROP withdrawals, according to the fund, will be subject to liquidity tests that will measure the withdrawals’ overall threat to the pension system itself.
“We believe the resumption of measured DROP withdrawals is appropriate and equitable,” the fund said in a press release. “The liquidity problems experienced over the past four months are partially the result of the mayor’s actions and statements creating panic among Dallas’ retired police and firefighters.”
