The El Paso Fire and Police Pension Fund Board of Trustees is seeking to get cost-of-living pay increases previously approved by the City Council for members hired after 2007, but state law has complicated whether the city can help pay for those raises.
Police and fire employees can contribute a percentage of their paychecks to the fund toward their retirements, with the city also contributing toward the fund using taxpayer dollars. Any increases to contributions from the city must be approved by voters; while fund members vote on changes to their contribution levels.
But state law only allows cities to change their contribution rate dependent on whether the current rate is sufficient to maintain the amortization period – the time it would take to pay off the accrued liability – as determined by the actuary, according to the Texas Pension Review Board.
At issue is a second retirement contribution level, Tier 2, which stipulated police and firemen who were hired after 2007 would not receive cost of living adjustments after they retire. The change to the benefits program occurred after the pension fund’s unfunded liability grew to about $380 million in 2009 – requiring a $210 million bailout from the city.
About 50 police and fire officials lined City Council chambers on Tuesday in support of the cost-of-living adjustments while the council, legal staff and pension board members debated and discussed how the raises could be implemented and funded.
The first year of cost of living adjustments for Tier 2 fund members would cost about $6 million, but the city will not contribute to it unless the Legislature changes its statute or voters approve the additional cost in a future election.
The City Council on Tuesday postponed taking any action until Nov. 12 so that the pension board can return to its membership to vote whether to approve the pay increase request at their own expense – for now.
El Paso police officers and firefighters attend an Oct. 22, 2024, City Council meeting where their pension funds are being discussed. (Elida S. Perez / El Paso Matters)
If the pension fund board proposes paying the 1.5% cost of living increase through their own contributions, no change in state law is required, but state law changes would be necessary to adjust city contributions, City Attorney Karla Nieman said.
“Our current state law is very outdated. It’s based on an old standard and in order for the city to be able to adjust the contributions that it could pay into the fund, we would need to go back to state law and change the guidelines,” Nieman said.
Pension fund Executive Director Tyler Grossman questioned that assessment.
“We agree to disagree, but that being said, we’ve always been collaborative, we’ve always worked with the city,” Grossman said. “We’ve always tried to be a good partner with them and so if this is what it takes to be that good partner, then we’re going to do it because the cost of living is too important.”
The 89th Texas Legislature is scheduled to be in session from January to June.
The change in state law would be required despite a City Charter amendment election in May 2023 that removed the cap to the city’s contribution to the pension fund and allows the city to increase its contributions without voter approval.
The charter now states that the city will contribute no less than 18% of the total amount it expends on wages for the fund participants – 18% was the prior maximum contribution allowed.
Grossman said the initial request to the council was to approve the increase and fund it as well as increase contributions to both the police and fire funds since the city has been contributing the same amount – 18% – since 1968.
“Our argument was through the charter (election) the citizens have spoken – they gave the city the ability to raise contributions as a budgetary issue, and now they’re (the city) is coming back as it’s now a statutory issue instead of a charter issue,” Grossman said.
Members also contribute 18% to the pension fund, which Grossman said is among the highest employee contributions in the state. Members contributed about $33 million in 2023 with the city also contributing about $33 million, according to the pension fund’s December 2023 financial statement.
The fund has about 1,100 active members and about 1,200 entitled to receive benefits as of December, according to the Texas Pension Review Board.
City Rep. Brian Kennedy, who placed the items on the Tuesday agenda, said he wants the city and pension officials to work together when they approach the Legislature to request the change in law.
“Our (city) charter can change, but we also have to make sure that the state statutes are changed,” Kennedy said.
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