The 45th Legislature established the Texas Local Fire Fighters Retirement Act (TLFFRA) in 1937 to create local retirement systems for the benefit of full-time, part-time, and volunteer firefighters in participating cities. At the time, lawmakers intended to create a general governance structure while still “leav[ing] administration, plan design, contributions, and specific investments to each system’s local board.” Despite a fair degree of flexibility and discretion however, the Act has led to an unfair power struggle between taxpayers and firefighters.
Of the 42 retirement systems remaining under TLFFRA, over $1.2 billion in unfunded actuarial accrued liability exists. Many of these systems employ outdated assessments and rosy assumptions, so the current liability is likely much higher. This situation demands urgent legislative action in the upcoming session to amend the Act and protect taxpayers’ financial well-being.
In Midland, the Act has divided the community. The Midland Fireman’s Relief and Retirement Fund (MFRRF) needs over $85 million to cover its unfunded liability over the next 25 years. City council members want to share the burden, but firefighters refuse to reduce their benefits or increase their contributions to the plan.
A recent actuarial assessment revealed that Midland firefighters are “benefit-rich.” MFRRF benefits are significantly more generous than similar-sized firefighter benefit plans statewide. The average normalized cost to total payroll for MFRRF is 13.6%, compared to 5.6% statewide. The average annual benefit for a Midland firefighter, based on 30 recent retirements, is $96,480. These benefits begin at age 50 with 20 years of service or at any age with 25 years of service. An 18-year-old joining the force could receive benefits at age 43. Benefits continue until the firefighter’s death, with 75% extending to the surviving spouse.
In Midland, the city contributes a hefty 24.2% of payroll into the fund, while firefighters contribute just 14.2%. Over the last 30 years, the city’s contribution has increased by 12.2%, while the firefighters’ share has only risen by 2.2%. About 50 percent of Midland firefighters do not live within city limits (many are not even in county limits) and do not pay property taxes in Midland, shielding them from financial consequences.
Every municipality in Texas with a firefighter force must participate in the Act unless they join the Texas Municipal Retirement System or a state law outlines their benefits. Changes to the plan can only happen with approval from the Board of Trustees (which the firefighters can easily control) and a majority vote by participants. Complicating matters further, “the composition of TLFFRA boards of trustees is set in statute,” leaving taxpayers with little control over the fund’s management and financial burden.
The City of Midland has asked the firefighters to cut their benefits while the city infuses cash into the plan to stabilize the fund. To date, the firefighters have refused. The city, facing a significant legal obligation to cover the fund’s liabilities, must consider alternatives like issuing bonds, increasing taxes (both requiring public votes), or adopting a pay-as-you-go model that would reduce city services. None of these options are ideal, to say the least, and pose challenging questions amidst a souring national economy and a brewing affordability crisis.
In its current form, TLFFRA has imposed instability on taxpayers and the firefighters it intended to protect. Legislators should propose and implement meaningful changes to this unjust and unfair system in the upcoming session, preferably with the aim of granting true “local control of local retirement systems.”
The voices of local property taxpayers, who bear the brunt of these financial decisions, must be heard and considered.