While Dallas and Houston have been wrestling with very public battles over their pensions for city employees, Fort Worth has been nursing a pension crisis of its own for years. Now, city officials are working to find solutions.

Changes needed

The bad news for the more than 10,000 former and current city workers, firefighters and cops covered under Fort Worth’s pension plan came at a joint meeting of the City Council and pension board earlier this month.

The big takeaway: Fort Worth’s pension fund is on the hook for about $1.6 billion more than the fund is expected to be able to pay.

“This plan is not sustainable without changes,” said Paul Schrader, a consultant with the firm PFM Group Consulting, which Fort Worth hired to help sort the pension problems.

Shrader told city leaders that the pension fund was once fully funded, but that was back in 1991.

“How did you get to where you are today? What happened?” Schrader said.

His answer: Today’s troubles stem largely from years of bad investment assumptions. Five years ago, the city made changes to try to shore up the fund, but it wasn’t enough. Last year, the credit agency Moody’s downgraded the city’s credit rating. It did it again this summer.

“It’s going to be very difficult for the plan to survive under the current situation,” Schrader said.

The upside

While Fort Worth, Dallas and Houston all have pension problems, they arrived at them differently. And the scale is different, too: Houston’s unfunded liability was nearly five times as large as Fort Worth’s, and Dallas Mayor Mike Rawlings raised the specter of bankruptcy. Both cities made changes this year in a move toward solvency.

As for Fort Worth, Moody’s analyst Tom Aaron says action must be taken to move the city back into the right direction, but he said the city is much better off than many U.S. cities with similar struggles.

"You know it's never easy when you start messing with pensions or you start tackling the issues with your pension."

“We have a rating of AA3 on the city, which is a very high investment grade,” he said. “So in our view, this is a growing challenge that has resulted in some deteriorating credit quality for the city. But at the same time we still maintain a very high investment grade rating.”

The city has a lot going for it, Aaron says. The economy of North Texas is strong. The city’s leadership seems stable. And Texas law allows cities to more leeway to make pension fund changes than a lot of other states.

“That legal flexibility can benefit the city as it seeks to grapple with this accumulated unfunded liability,” he said.

What's next

That doesn’t mean it’ll be easy. Actuaries say better investing alone won’t close the shortfall. Employees will have to give up benefits or pay more wages toward the city, or the city will have to put more taxpayer money into the system. Most likely, it’s some combination of all three.

At the pension fund briefing, Fort Worth Police Association President Rick Van Houten, who sits on the city’s pension task force, pointed out that public employees already accepted cuts to benefits a few years ago.

“And now we find our place in a position where we now need more contributions,” he said. “So they’re going to need some type of incentive to say yes.”

Fort Worth Mayor Betsy Price says the stakes are too high to do nothing. Without changes, the pension fund will likely run out of money by 2050.

“We can’t afford to saddle our taxpayers with that, so everyone’s going to have to come to the table and work on it because our employees deserve the pension they were promised and the taxpayers deserve a city that’s fiscally sound," she said.

The city’s pension task force is expected to present proposed fixes to the City Council early next year.