To all Garland Fire Fighters Association members,
As many of you are aware, the City of Garland cut funding for a Texas Municipal Retirement System (TMRS) retirement benefit, Cost of Living Adjustment (COLA). This is a very important issue that is going to have a dramatic impact on current and future retirees from the City of Garland. The loss of this benefit has already affected our current retirees as of January 1, 2009. This benefit affects all City of Garland retirees, not only our retired brothers and the surviving spouses of our retired brothers. However, due to the fact that as civil service employees we do not pay into Social Security, this benefit cut will have a more significant impact on police and fire retirees. I urge you to take the time to read this message and if you have any questions, please feel free to contact me.
The TMRS COLA issue has dominated E-Board and PAC Board meetings since November 2008. The E-Board and PAC Board have been conducting and attending meetings with the Mayor, City Council members, and the City Manager. These meetings have been productive and some progress has been made, but there is still a great deal of work to be done. The E-Board and PAC Board have also been working with TMRS and Texas State Association of Fire Fighters (TSAFF) officials as well.
Here is an example of the impact of the loss of the COLA benefit. With the loss of COLA a current retiree will have his or her retirement income reduced by 34% in just ten years. To state this another way, if the rate of inflation averages 4% over a ten year period, the value of a current retiree's dollar today will be worth only sixty six cents in ten years without COLA. This is due the inflation rate continues to climb, but the retirees income remains the same. This is a pay-cut that nobody can afford. Following is a list of items that have been discussed and what has been done to support of oppose these items.
- TMRS Accounting Changes - During 2008 TMRS implemented changes to the actuarial accounting methods. These changes revealed an unfunded liability of approximately $204 million. Roughly $100 million is due to the COLA benefit. In order for the City of Garland to continue funding COLA, the City of Garland's contribution rates would increase from approximately 16% to approximately 23.5%. There are slight fluctuations in these numbers but these are close. This increase would represent roughly $7 - $9 million in additional funding per year, these numbers are estimations as well and could vary. TMRS realizes that this is a significant increase in contribution rates, so they are allowing the cities to phase in these increases over an eight year period and the total amount would have to be paid in full in thirty years. This accounting issue affects all cities in TMRS, however it affected some cities much more negatively than others.
- Second Tier Retirement System - The City Manager had been working on a second tier retirement system that would include placing all new employees into a retirement system outside of TMRS after a certain date. In order for this to be possible the City of Garland would have to have legislative approval to pull new employees out of TMRS. The idea behing this plan was to fund COLA for current and future retirees form a cost savings from the new plan. After reviewing this plan and much discussion by the E-Board and PAC Board, we decided that this plan was an unacceptable solution to the COLA problem. Due to the fact that this plan would require legislative approval along with other issues, this plan would not be able to produce a COLA for current retirees for at least ten years and even then it would not be a sustainable COLA. As of our last meeting with the City Manager, the second tier option is no longer being considered.
- Funding of COLA through TMRS - Funding COLA through TMRS is the current solution that the E-Board and PAC Board support. This is what we are focusing our effort on. The E-Board and PAC Board have spent a tremendous amount of time researching the City of Garland's financial reports to try to find a way to fund COLA. We have some ideas about how this can be accomplished and this is where the political battles begin. Over the next several months we will continue to meet with city officials to discuss our ideas and attempt to help find a workable solution to the funding issue.
- TMRS Legislation - There is also TMRS Legislation (House Bill 360) in the State Legislature that could help the city fund COLA. What TMRS wants is asking the Legislature for in this Bill ,is to allow TMRS to guarantee a minimum rate of return of 5% to member (employee) accounts. They are also asking for the ability to credit the member accounts and the city accounts with different rates of return. The idea is to use rates of return above 5% on member accounts to help lower city contribution rates. If this happens this will provide additional leverage for us to push the City of Garland to fund the COLA benefit. Originally, we had some concerns with the language of this Bill. After several conversations with TSAFF officials, one who is on an advisory board to TMRS, we were assured that our concerns had been addressed and that this Bill is our best option at this time. The goal of this Legislation is to provide some relief to cities so that they do not make further cuts in benefits. This Bill is supported by several associations as well as the TSAFF, and we have decided to support is also.
I know this is a lot of information, trust me this is just an overview, but it provides a good baseline of what is going on with this issue. I really appreciate you taking the time to read this lengthy message and I encourage each of you to attend the GFFA regular meetings as well as PAC meetings to stay informed. I will continue to update our website as information becomes available.
Please check the TMRS / COLA tab on the website for details and information. Please feel free to contact me if you have any questions about this information.
Thank you and be safe,
3rd Vice President - GFFA
Secretary/Treasurer - PAC Board