After the Midland City Council unanimously authorized an eight-figure bond agreement that, along with cuts to firefighter's benefits, aimed to bring the $109 million pension deficit into the clear, the Midland Firemen’s Relief and Retirement Fund board (MFRRF) voted down the measure.
If the measure had made it to the ballot and was approved by voters this November, the bond amount would have been between $60-61 million.
But first, the proposal, as prescribed by state law, had to be approved by firefighters who had to agree to benefit cuts of 5% or more, as determined by the City's actuarial firm Foster & Foster, in order to ensure the longevity of the fund. Employing the recommended ratio by Foster & Foster, the City would provide 2/3 of any future adjusted fund contributions, with MFRRF members on the hook for the remaining 1/3.
This would mean that firefighters who have been hired for years into jobs with benefits that the City and/or fund currently cannot afford, may now have to give up a percentage of those same benefits to receive what they were promised upon hire.
To pay for the retirements of the fund’s 197 retirees and, eventually, its 234 active firefighters, MFRRF would need to have $190 million in current assets.
Midland Mayor Lori Blong issued a statement on the MFRRF's rejection of the bond measure and funding proposal.
“The City Council is working through options, seeking input from our expert advisors and from State leadership. We are also committed to work in coordination with the Fund Board, to seek a solution that cares well for firefighters and their families, as well as caring well for the rest of the families of Midland,” Blong said.
The Texas Pension Review Board met for a regularly-scheduled meeting on July 25, just two days after City Council proposed the bond, and discussed compliance of municipal firefighter funds across the state, including the MFRRF – as part of a Funding Soundness Restoration Plan (FSRP) report.
“Midland Fire approved their 12/31/2023 actuarial valuation, and both the City and the members have been waiting for that evaluation,” said TPRB Senior Actuary David Fee during the meeting, broadcast on YouTube.
MFRRF had received that report, prepared by Rudd & Wisdom, Inc. on May 30, which was conducted to determine if the fund had an adequate contribution arrangement. According to that report, it did not, necessitating changes in that area.
The issue of potential benefit cuts for the City's firefighters arose during the meeting broadcast, as PRB Member Marcia Dush offered comment on the issue, and how that may relate to the fund's future goal of financial stability. PRB board members are concerned about future hires' benefits.
The longtime contribution issues of the fund recently reached an inflection point.
The PRB, in accordance with Section 801.209 of the Texas Government Code, had published the list of all pension benefit plans which had not submitted their required reports or information to it by the 60th day after the date the reports or information were due.
At the time of the list’s original publication, the MFRRF appeared on it.
According to language on the PRB’s website concerning compliance frequently asked questions and late reports: “If an annual report is late by more than 60 days, we will contact the retirement system and ask for a status update on the late report/s. If the report/s cannot be sent to the PRB, we will send a letter to the sponsoring entity of the retirement system notifying them of the non-compliance with state reporting requirements and the retirement plan will be added to the list of non-compliant plans over 60 days, which is published on our website and reported to the Board at each meeting.”
Midland Times had investigated the MFRRF's initial placement on the non-compliant list and received a response from a City spokesperson, who said: “The MFRRF is currently listed as non-compliant because of the concerns found regarding the investment expense section of a 2022 annual audit. Once confirmed that either the information in the audit is accurate or that the PRB has received corrected investment expense details, the system will be marked as compliant.”
When asked by Midland Times about the status of the missing investment expenses from the annual report, the Administrator of the Midland Firemen's Relief & Retirement Fund, Shera Crow stated via email that the report in question had been sent to the PRB on June 25, and expressed hope at that time that the Fund would be “removed from the delinquent list upon receipt.”
According to documents provided in conjunction with the July 25 meeting, the MFRRF is now back in line with the PRB’s reporting guidelines and has been removed from its list of non-compliant funds.
According to the Texas State Comptroller, MFRRF had $80.9 million in assets as of Dec. 31, 2022, on which it earned zero in investment income in 2023.
In 2022, current firefighters contributed $3.3 million into MFRRF, or about $1,185 each per month. City of Midland taxpayers gave the fund a $5.2 million subsidy.
The fund currently has an “infinite” amortization period, meaning that, based on MFRRF’s former actuarial assumptions, it would never have enough money to pay for the current and future retirement benefits it promised its retirees.
However, the PRB has now set a future deadline of September 2025 for the fund to provide a 25-year plan for amortization.
An article from NewsWest9 published last December quoted Mayor Blong as saying in reference to the fund, in part, “There has been a lack of performance investments, and there is also a lack of adequate contributions to the fund, to meet the future promised benefits of the fund. So we are increasing our contribution to the fund, so that we can more adequately meet the promised future benefit.”
In the summer of 2023, the Midland Fire Department voted to change in part the calculation metric used to determine overtime benefits, and additionally, the City of Midland approved a 2% increase in its contribution to the Fund last December.
In 2023-24, the City of Midland’s total budget was $145.9 million.