It’s clear from a letter state Rep. Dan Flynn sent to Galveston Mayor Jim Yarbrough last week that the main question facing city negotiators, the police pension board and, by extension, the police union is not in the operational details.

There are plenty of compelling operational questions needing answers, along with some moral, ethical and practical questions about what’s fair for police officers and taxpayers and what’s possible given simple financial reality.

The most immediate and fundamental question, however, is whether the police want to agree here and now on ways to improve the ailing plan, or whether they want to hold out and let the state legislature do it.

Those are the options Flynn outlined in his letter. And what Flynn thinks is important because he chairs the pensions committee of the Texas House of Representatives, which can mandate reforms, and did so in Dallas and Houston.

The question here is akin to one often facing people caught up in litigation — reach a settlement that nobody’s overjoyed about but everybody can live with, or send the matter to a jury and hope for something better.

The problem, however, is that on the main sticking points, Flynn’s letter doesn’t promise anything better for police officers covered under the pension than the city already has offered.

In fact, the city’s proposals, which the pension board so far has rejected, are more generous than what Flynn suggests as mandatory reforms.

For example, the plan now allows police officers to retire and draw full pension benefits at the age of 50. The city argues that age should be at least 55. Flynn in his letter said the age should be at least 58.

The lawmaker, who will have considerable influence or how Galveston’s police pension is reformed if that reform happens in Austin rather than here, didn’t mince words about the retirement age.

“It is simply unsustainable to leave a retirement age at 50, especially when citizens don’t get near that option and often work to their late 60s or 70s,” Flynn wrote.

The other main sticking point in a local solution to the pension problem has been the makeup of the pension board.

The board of seven consists of four members appointed by the Galveston Municipal Police Association, a union representing officers, and three appointed by the city.

The city wants that four-vote union bloc broken somehow. Flynn argues for an even more substantial change in the membership.

“The board makeup should be heavily weighted in terms of investment professionals that know how to invest and protect the pension for the oldest retiree and the newest recruit,” Flynn said.

The city and police board are trying to come to an agreement before January when the state legislature returns to session. If a deal cannot be reached at the local level, the state will step in to make a deal, Flynn has said.

Last year, Flynn led efforts to reform struggling pensions in both Dallas and Houston. That resulted in a state law increasing retirement ages, hiking worker and city contributions, limiting cost-of-living increases for retirees and restructuring governance.

It’s clear what’s going to happen if this problem goes to Austin. Unclear is what the union representatives on the board hope to achieve by rejecting the city’s offers.

• Michael A. Smith

Michael A. Smith: 409-683-5206; michael.smith@galvnews.com

Editor

(18) comments

Don Schlessinger

Rep. Dan Flynn is a friend of Galveston residents paying property taxes. I'm happy he's watching.

Clinton Stevens

It’s not a matter of finding a better deal Michael. The changes that Representative Flynn and city management have advocated for would have a catastrophic effect on the department if implemented.

Unfortunately the city of Galveston can’t see the forest for the trees. No one seems to have noticed that 53 officers have quit the department in the past 3 years with the retirement system being the number one reason cited.

Further devaluation of a benefit that already forces a senior officer to “retire” drawing $26k per year will result in a mass exodus the likes of which Galveston has yet to experience. Including your senior officers that have over 10 years experience who will suddenly find themselves in a position where it makes more sense financially to seek employment elsewhere and draw any retirement contributions they’ve made to date.

The Daily News owes a debt to its readers to research this topic thoroughly and understand it before reporting on it.

Jarvis Buckley

I think age 50 is a little early in life to think about retirement. Many of us are still working at 65. How fortunate it would be to retire at 50.

George Croix

Depends on WHAT work, Jarvis.

Lisa Lohmann

I guess you missed the part about $26,000 a year and no health insurance. None of them really retire, they go find another job.

Geoffrey Gainer

The Myth of Full Retirement

First, the term “full retirement” simply means that an officer is allowed to retire without penalty. It does not have a specific dollar amount, but is rather a percentage of his base pay that is calculated using their years of service. The Plan’s Board of Trustees have recently voted to raise the age of retirement for new hires from age 50 to age 55. This was at the request of the City of Galveston administration, yet against the advice of officers worried about recruiting. The first misconception of raising a retirement age is that by doing so, you are increasing the amount of time officer’s work. There are in fact two time requirements that need to be met in order for an officer to “fully” retire. Those requirements are 20 years of service AND a minimum age of 50 to draw a benefit. So if an officer is hired at the age of 25, he would be eligible to “fully” retire at age 45, but not receive any benefit until 50. Currently, the highest police officer pay level is $68,190.76. This officer would be entitled to 42.2% of an average of his last 5 years base pay. This means that the percentage of pay would be based on a salary approximately 5% less than his final salary. However, for simplicity sake, we will just use his final salary for this example.
This officer’s yearly retirement benefit would be $28,776.50, for the rest of his life, without change. This is calculated by using the Plan’s benefit formula of 2.11% multiplied by a minimum 20 years of service, to equal 42.2%. Once the 45 year old officer is of age to receive this benefit (at age 50), the value will have been eroded by inflation due to there being no cost-of-living-adjustment (“COLA”) in this Plan. According to the Bureau of Labor and Statistics, the average inflation for the past 10 years has been historically low at approximately 1.98%. This means that the value of the benefit this officer will receive at the age of 50 will be worth $25,924.75, and continue to erode by approximately 2%, assuming that we keep setting records, every year for the rest of his life. By moving the age of retirement to 58, and we maintain this low inflation rate, the value of his retirement will have dropped by 25.74%. This is equal to $21,369.43 in today’s dollars. For the record however, the average 20 year US inflation rate is 2.75% and the common assumption for estimating inflation for retirement annuities is 3%. Using this common assumption, the value of this officer’s benefit would decrease by 39%, equal to $17,553.66 in today’s dollars, by the time he receives his first check.

A common misconception is that when officers retire, they leave the workforce. While this is true in very rare cases, most involving disability, the overwhelming majority have to start a second career. For many, this is often for a police department that is much less active than Galveston due to the officer’s age becoming a safety risk. Many also continue governmental service in a non-police role. The City of Galveston for example employees many retired GPD officers who are working towards building a sustainable retirement. Lastly, officers may seek work in the civilian sector, however, this is difficult given the skills and experience as police officers do not always translate well to the civilian sector.
The retirement benefit offered by Galveston caps an officer’s eligible service time at 30 years. This would mean that if our 25 year old officer was to work to the age of 58, his last 3 years of service would be of no benefit to him, as he would have capped his service time at age of 55. This is 3 wasted years an officer could have continued to work towards a sustainable retirement. Regardless, plan actuaries account for retirement ages, rates, years of service, and salary. This is reflected in the Plan’s “normal cost”. Normal cost is the value of an officer’s retirement benefit and is expressed as a percentage of his salary. This is the same way a civilian would receive advice from a financial advisor when planning for retirement. The civilian would express the age at which he wanted to retire, and the amount he wished to make when he retired, and the advisor would direct him as to how much money needed to be set aside per month. Currently, Galveston officers contribute more than the normal cost of this Plan, meaning they pay more than is required to retire at the ages specified in the Plan. Increasing retirement age is similar to officers paying 1 dollar now, and receiving 61 cents when they retire.

To make matters more difficult, Civil Service law does not allow officers to be hired after the age of 45. This limits the opportunities officers have in seeking employment at another agencies to supplement their modest retirement benefit from Galveston. It also puts the officer in a very tough position, in that he must decide very early in his life to leave the department, so that he is eligible to begin a second career that will sustain him when he truly leaves the work force. It would not be in our 45 year old officer’s best interest to stay in Galveston when he can only add 10 more years of service to his benefit. He will most likely try to move to another department, start at the bottom, and work until he is eligible to retire from there as well.
The Easy Fix
While the comment section of the last few GDN articles are full of advice on what needs to be changed in the plan, let me guaranty that there is no easy fix. Hopefully the previous section explains how meager a Galveston police officer’s retirement benefit is. In fact, most officers tend to reinvest their small retirement from Galveston in the form of IRA’s so that they can truly retire one day. One might suggest forcing the officers to work longer by increasing the service time, but that would also increase the retirement benefit, offsetting the savings to the plan dramatically. It would also limit their opportunity to work elsewhere to build for a sustainable retirement. Another suggestion that is commonly voiced, is that the police should be in 401k style plans. Besides the fact that this has devastated the recruiting and retention of the few agencies that have tried it, Galveston simply cannot afford to do it. In order to make an entirely new retirement plan, the City of Galveston would need to buy ALL of the unfunded liability from the plan, and continue to fund a dead plan until the last member had died. At the same time, an entirely new fund would need to be established and funded. This would be an estimated up front cost in excess of 50 million dollars. I also hear that the Plan should incentivize Officers to stay longer by increasing their benefit as they work beyond 20 years, or offer to make officer’s stay longer, and have the fund maintain the value of their benefit through a COLA. While both of these things would be great options for the Police that serve Galveston, it is unfortunately extremely expensive, and would add a significant amount of unfunded liability to the Plan. As a general rule, if any solution offers any additional benefit to what is offered currently, the plan would need more funding.

Brian Maxwell

Not to debate but only to clarify, the average annual retirement amount for officers for the last 10 years is $34,738.48. It varies with some retirees nearing $50,000 a year while others make less depending on rank. They receive that benefit for the balance of their life.

All GPD Officers also will receive Social Security benefits. The average age of retirement over the past 10 years for GPD Officers is 51 years of age.

In contrast civilian city employees must work until 65 to receive a full, unreduced benefit. The benefit is capped at $50,000 a year but it is mathematically impossible for most city employees to receive the full benefit and most receive considerable less and many less than the average PD salary I show above and that can be with up to 40 years of service. Several city employees have died on the job awaiting the ability to receive their full pension.

Fire department retirees do not receive social security benefits and most retire in their mid to upper 50’s, similar to what is being proposed for PD officers.

Other cities that have a 20 year and out clause base the retirement on deposits made versus a guaranteed “defined” benefit. Civilian city employees do not have the option of 20 and out.

Thanks,

Brian

Don Schlessinger

The union probably wish you had not brought up SS benefits police have. I'm for ending the policy of saving vacation and banking it for retirement. I wonder how much we tax victims would save from that one change. Carrying over vacation time might be nice for police, and all city employees is great for them, but it costs ME money. Very few companies in industry have that perk.


I also think the idea of 401K accounts should be the way to go. If the cost is prohibitive with the whole force now then start with the next class of cadets. Deal with the problem we have now with police retirement, but start ending it now instead of allowing it to grow in the future.


Also, my thanks to Brian Maxwell for being a part of the conversation. I appreciate your participation.


Losing police officers because of pay and retirement is a problem, but losing residents because of police salaries and retirement might become a bigger problem if Galveston is too expensive to live in.

Geo Martinez

Several city employees have died on the job awaiting to collect their pension?!?! Do you know how many officers die on the job awaiting the day they can retire?? Real bold statement there Brian. According to tcole, the average life expectancy of a police officer is 58-59 years. Let that sink in.

Brian Maxwell

Actually the mortality table provided by the actuary shows the life expectancy of the police officers to be longer than our civilians. I know of no GOD officers who have perished while I have been at the city and I hope none ever do.

On the other hand several civilians have. And that has sunk in.

Geoffrey Gainer

What an unbelievably accurate representation of how the Galveston City administration thinks of its officers. Rather than take one minute to think, reference, or ask, you post something as insensitive and dividing as that Maxwell. You have asked me in the past why there is a rift between the police and City administration. Well, I can tell you unequivocally that the answer is that kind of thinking, or lack there of. You owe this entire department and it’s retirees an apology. You and I arguing over a pension agreement is one thing, but the officers do not deserve the level of disrespect you have shown them, and on a holiday to celebrate thankfulness none the less.

Happy Thanksgiving GPD, at least we have each other.

Brian Maxwell

GPD not GOD.

Geoffrey Gainer

I’ll get you a list Mr. Maxwell, but I believe you were at Christopher Sanderson’s funeral. As well as the funeral for Jeff Wyers. It would be more respectful to give statements like that a little thought before making them public record. Perhaps that comment should be removed.

Also, the mortality table covers people that make it to retirement and draw a benefit. There is no reason for the actuary to track officers who don’t live long enough to draw a benefit.

Geoffrey Gainer

As most can infer from the explanation of GPD benefits, the reason why pushing the retirement age later, is that it will decrease the value of the benefit. It is the same as offering the officer 25%-30% of their salary for retirement. The public would not approve of this however, so it is easier for public perception to push the age of collection and let inflation decrease the value. That way it does not look as bad on paper as it actually is.

Rusty Schroeder

Retire at 50 with a 25K retirement for life plus SS eligible, that's a pretty good deal. Point being any officer worth his salt will parlay that into a security job with a bank or governmental agency in a flash. Some even leave for public office. The next job is usually better than the career job and will pay more. I look at this like a county employee's retirement benefits, no SS eligibility, and it's a years served plus age to reach retirement. It's nowhere close to 50 yrs. old, probably 60 at the earliest. I think there has to be some give on the Police side, the board has to be more equal than as it is now. My advice is better start negotiating with a purpose, because if you can't see the writing in black and white coming from Austin, the union is going to be very disappointed.

Clinton Stevens

I suppose it just depends on whether you want a professional police department or a training ground for other agencies.

The retirement plan is already not competitive with other police agencies who are more than happy to tout their benefits as they continue poaching well trained and experienced officers from Galveston. This ongoing exodus has already cost the taxpayers hundreds of thousands of dollars and the bleeding will continue until this problem is resolved.

The retirement plan’s board has already voted in the past to drastically reduce benefits and given up pay raises in order to shore up this plan. The board has also voted to raise the retirement age for new hires to 55. So there has been some give here, it just hasn’t been reported on. I can only presume because it doesn’t support the narrative here.

Rusty Schroeder

I live in a city that is a training ground for other agencies, have said it for years. I would look at models like League City and Texas City, both pretty good departments in size. It just seems something could be worked out by comparing like size agencies before this goes to Austin. If that happens there will be hard feelings on one side or the other, human nature. Galveston is a tourist city that is busier in warmer months than colder ones except for a few big events like the Motorcycle Rally and Mardi Gras. That has to be a factor in keeping a larger police force for when certain times of the year don't support it. I wish my community had a larger police force, but there has to be a way to pay for it to make it reality. Nobody want's to hear higher taxes when everyone is asking for increased funding, at least on the mainland.

Lisa Blair

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