Firefighters, city reach agreement on retirement fund

Negotiators for the city and Austin firefighters have finally reached agreement on how to deal with the Austin Firefighter Retirement Fund so that it complies with state law and can promise retirement benefits to current and future retirees. This has been a vexing problem for the city and its firefighters for some time.

Mayor Kirk Watson told his fellow City Council Members that the city and representatives of the retirement fund have signed a memorandum of understanding about how to deal with retirement funds and current unfunded liabilities.

Until there was an agreement, there was little hope that either of two dueling legislative proposals would make it through either chamber of the Texas Legislature.

Austin Firefighters Association President Bob Nicks told the Austin Monitor that the chairs of each committee oversaw the negotiations, encouraging them to reach an agreement.

However, both the Senate and the House will hold hearings today on compromise bills in line with what the two sides have agreed to. The House Committee on Pensions, Investments & Financial Services will take testimony on HB 2802 by Rep. John Bucy of Austin, and the Senate Finance Committee will hear testimony on SB 2345 by Sen. Charles Schwertner of Georgetown. Nicks said Monday that he has been watching the negotiations and is prepared to testify at today’s hearings. Nicks told the Austin Monitor that Watson, who chairs the firefighters retirement fund, did “a great job” in working to bring the two sides together in a compromise.

If approved by the Legislature, Nicks said, retiring firefighters will receive retirement benefits based on when they began their service, how long they work and when they retire. The same is already true for City of Austin retirees as well as retirees from the Austin Police Department. Currently, the pension fund has a $300 million unfunded liability. Nicks said “the city is agreeing to buy down our unfunded liability” and in exchange they will create “a second tier for new hires in Jan 2026.”

Nicks said a second tier for future retirees is very common. In return for a lower benefit package for future retirees, the city will pay off the fund’s debt over the next 30 years.

On the City Council Message Board, Watson wrote to his colleagues, “As you know the (retirement fund) is currently projecting a significant unfunded liability. This legislation will make the fund actuarially sound. From the beginning and wearing both of my hats (as Mayor and as statutory Chair of the Fund), my goal has been to ensure fiscal soundness. This took a little longer than I initially wanted, but that often happens with big issues and complicated legislation. I’m grateful we’re here.”

Nicks explained that the dire financial situation at the retirement fund came about because of a cost-of-living adjustment that the pension fund gave to retirees. “We were almost 100 percent funded in ‘21 or ’22. Our actuary said we could afford to pay a 4-5 percent cost of living adjustment,” he said. But looking back, he said that was a big mistake. Although Nicks has retired from firefighting, he continues to represent his fellow firefighters.

Photo made available through a Creative Commons license.