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Texas Legislators Debate Austin Firefighters Retirement Fund Reform

Austin skyline illustrating the ongoing legislative discussions about the firefighters retirement fund reform.

News Summary

Austin is at the center of critical discussions among Texas legislators regarding two competing bills targeting the funding structure of the Austin Firefighters Retirement Fund (AFRF). House Bill 2802 and Senate Bill 2162, backed by city officials, aim to address the fund’s alarming unfunded liability projected to exceed $327 million. As financial insecurity looms for retirees, alternative proposals are also being considered. The outcome of these bills is crucial for the future vitality of the AFRF and the security of its beneficiaries.

Austin is currently facing critical discussions among Texas legislators regarding two competing bills aimed at reforming the funding structure of the Austin Firefighters Retirement Fund (AFRF). These proposals come in light of significant financial challenges that have prompted concern for the long-term sustainability of the fund.

What Happened

The Texas Legislature is reviewing two proposals: House Bill 2802 and Senate Bill 2162, both filed by Rep. John Bucy and Sen. Pete Flores respectively. These measures are backed by Mayor Kirk Watson as a response to ongoing worries about the AFRF’s financial health, which has drawn scrutiny from the Texas Pension Review Board (TPRB). The fund has been on the TPRB’s watchlist for two consecutive years due to issues of non-compliance with state requirements.

The AFRF is currently regarded as “not actuarially sound,” with an alarming unfunded liability projected to surpass $327 million by the end of the year. Under these circumstances, the payback period for this liability is anticipated to exceed an astonishing 100 years, raising serious concerns for the financial future of the fund.

Who Is Affected

Retired firefighters, as well as current members of the AFRF, are significantly impacted by these developments. The uncertainty surrounding their pension requires them to consider their financial security as many retirees are already exiting the workforce. An increase in retirements contributes to the strain on available funds, creating a looming question of sustainability for future cost-of-living adjustments (COLAs).

Official Response

In response to persisting financial challenges, an alternative set of bills has been proposed by Sen. Charles Schwertner and Rep. Ellen Troxclair, titled SB 2345 and HB 4873. This alternative framework aligns more closely with the approach the AFRF advocates. A significant contention between the city’s and the AFRF’s legislation revolves around provisions related to cost-of-living adjustments.

The city-backed legislation intends to focus on preserving the existing ad hoc COLA while enforcing financial measures designed to curb excessive spending. Conversely, the AFRF emphasizes the necessity of a predictable 1% annual COLA to maintain purchasing power for retirees.

Impact

Data indicates that the current contribution rates into the AFRF are insufficient to adequately cover annual benefit accruals alongside interest on the unfunded actuarial liability. Consequently, there is a heightened risk that the Funding Soundness Restoration Plan (FSRP) might be triggered, which would necessitate more stringent remediation measures. An actuarial report revealed that the amortization period for the fund stands at 35.7 years, significantly exceeding the TPRB’s recommended threshold of 30 years.

Furthermore, while cost-of-living adjustments had been provided to retirees roughly 80% of the time over the past decade, no adjustments are currently anticipated for 2023 or 2024—creating additional financial anxiety among the retiree population.

What’s Next

As discussions between city officials and the AFRF continue, there is an expressed commitment from both parties to seek collaborative solutions. Both sets of legislation will be evaluated for their efficacy in addressing the concerns raised about the fund’s financial health. Furthermore, the potential for active communication and cooperation may yield innovative approaches to restore and maintain the financial viability of the AFRF.

Initiatives to enhance the fiscal status of the fund are imperative if both parties aim to secure future retiree benefits while adhering to state requirements. As the situation develops, the outcomes of these legislative proposals will be closely watched by those invested in the long-term health of the Austin Firefighters Retirement Fund.