The city has been underfunding the Galveston police pension for the past 17 years, Texas Pension Review Board actuaries said in a new report.

That report also states the Galveston pension fund is operating with a “significant amount of risk,” and that current police officers are contributing more to the plan than they are expected to benefit.

The Texas Pension Review Board is mandated to oversee all Texas public retirement systems, both state and local, in regard to their actuarial soundness and compliance with state law.

The state board delivered the report last week to a state actuarial committee, whose members concluded police pension contributions needed to be increased to be in compliance with state and city law.

“The fund is facing significant financial stress and is taking considerable risks in its approach to funding the plan,” the report states. “Galveston police and the city have waited too long to address these challenges, which has exacerbated the situation due to the compound nature of pension liabilities.”

The chairman of Galveston’s police pension board, which has recently claimed the city owed up to $1 million in contributions to the plan, based on a new interpretation of state law, argued the report vindicated its position.

“I’ve been saying these things for a long time, and I’ve kind of been on an island,” Galveston police pension board Chairman Geoff Gainer said. “This set us up on the right track.”

Deputy City Manager Dan Buckley, meanwhile, disputed whether the city owed any money based on the Galveston police pension board’s interpretation of the law.

“We have lawyers that say maybe that’s not exactly what it means,” Buckley said.

At the Thursday meeting, Assistant City Manager of Finance Mike Loftin confirmed that for the past 17 years, the city hadn’t been paying into the fund an amount recommended by the state pension board, however.

The Texas Pension Review Board report blamed the state of the Galveston police pension on inadequate contributions, insufficient investment returns, increased payments to those benefiting from the plan, and a low ratio of people paying into the plan versus those taking money out of it.

One of the state committee members said he was baffled the Texas Pension Review Board was only now hearing about the state of the Galveston police pension. Another member said the governance issue over proper payments from the city “boggles” his mind.

The Galveston police pension plan faces $29 million in unfunded liabilities, with an estimated payoff period of 48.7 years. That period is one of the highest in Texas, according to the state’s actuarial report.

The plan was almost entirely funded in 2000, but in 2017, the plan was only 42.1 percent funded, according to the report.

Galveston police employees contribute 12 percent of their pay to the plan, and the city contributes fixed amounts equal to 12.83 percent of each employee’s pay to underwrite the plan. Buckley said the city and police pension board agreed on the rates in collective bargaining agreements, and both parties are paying those amounts.

The Galveston police pension is recommended by the state to receive an actuarial required contribution, or the amount needed to fund benefits accrued in the current year and maintain a payoff plan on unfunded liabilities that doesn’t exceed 30 years, according to state actuaries.

That amount hasn’t been received since 2002, with the exceptions of 2006 and 2008, the actuaries found. The city is contributing less than 82 percent of the amount needed to fulfill this number, according to the report.

The Galveston police pension board in 2017 voted to lower the assumed rate of return on the pension fund, and the state actuaries on Thursday affirmed the rate previously was too high, and one of the highest in the state.

Gainer also has claimed the city has underpaid its contribution to the pension, and the board in October 2017 voted to change the way it calculates city contributions, stating the city shouldn’t, according to state law, be paying a fixed rate.

Complying with those changes would cause the city to pay more into the fund, and the city hasn’t agreed to those changes, Buckley said.

The minutiae of how the state law should be interpreted is beyond the point, the state actuarial committee members said. The Galveston pension needs to be fixed, and more money will be required to make that happen, they said.

While the Galveston police pension fund is governed solely by a board of trustees, fixing the fund will require collaboration between the two groups, Buckley said.

“The committee said it’s going to take a collective effort by the city and board,” Buckley said. “We agree with that 100 percent.”

Samantha Ketterer: 409-683-5241; or on Twitter at @sam_kett



(5) comments

Ron Shelby

Were previous findings the same? If not, why not? If so, why wasn't something done 10 years ago during previous councils? This shouldn't be a surprise.

Lisa Lohmann

This has been addressed by the Pension Board and the GMPA for over 20 years, not just the last 17. It's important to point out the Pension Board has reduced benefits multiple times, and increased officers contributions twice but this is seldom reported. GPD officers contribute 12% of thier salary, one of the highest in the state.

Don Schlessinger

We've been reading recently about spiking. What would our unfunded liability look like if that wasn't a problem? It's rare in civilian life to see companies allow employees to bank sick leave and vacation for retirement. The city should be "applying the brakes" on this kind of wasteful spending and think of the citizens paying the bills.

Clinton Stevens

Don you’re thinking of the port plan. The police retirement plan is based on the last five year’s average base pay. Vacation and sick leave are not counted in that.

The average police retirement is approximately $26,700.

Lisa Lohmann

Not only do they not "spike", pension contribution is taken out of the OT worked, and the officer doesn't get it back, effectively making it a donation to the plan.

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