07.17.2017
Curtailing Police Pensions: Not As Simple As It May Seem

A recent Wall Street Journal article, “Ill-Funded Police Pensions Put Cities in a Bind,” discusses problems cities have experienced after cutting police pensions and other benefits.

According to the article, police and firefighter pensions are among the worst funded in the country, with a median of 71 cents for every dollar needed for future liabilities. In comparison, median funding for general municipal pension plans is 78% and the country’s hundred largest corporate pension plans are 85% funded.

The Wall Street Journal points out that police pensions were the first nonmilitary retirement systems in the United States, originally created in the late 1800s. Reducing these pensions may have political fallout, because voters generally empathize strongly with police officers.

The article focuses particular attention on the cities of San Jose, Dallas, and Memphis. In 2012, at the behest of the former mayor, voters in San Jose reduced police officers’ benefits. Hundreds of police officers responded by quitting; many started working at nearby cities that offered better benefits. Currently, over 16% of police officer positions in San Jose are vacant, the city has the lowest number of police officers per capita among the country’s 35 largest cities, and response times for the most serious calls have increased in the past five years from 6.1 minutes to 7.3 minutes.

A lawsuit filed by labor unions invalidated some of San Jose’s new pension legislation. While maintaining some of the pension savings, the City has taken steps to provide police officers with greater compensation than they received before the cuts, with a ten percent raise last month and three percent raises promised for each of the next two years. Police academy enrollment has recently increased. It remains to be seen whether San Jose’s situation will continue to stabilize.

The Wall Street Journal article also discusses Dallas’s severely underfunded police and firefighter pensions, with funding levels at only 36%. Finally, the Wall Street Journal reports on the exodus of police officers and rise in crime rates in Memphis after pension plans were replaced with a hybrid plan combining pensions and 401(k) plans.

Comment

As demonstrated in San Jose, Dallas, and Memphis, changes to police pension funds are challenging at best, both in political terms and in terms of maintaining police services.

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