social security,

It's not sustainable to add more officers until that problem is fixed

most recent available Census Bureau data. *Underlying link changed after publication, amount corrected upward from $55k to reflectCensus Bureau data.

Since the local press has ignored the topic, let's delve a bit deeper into the pension crisis at the Austin Police Department. As, anreleased in July found that the city willcover its police pension liabilities at current contribution rates.Bizarrely, in response to this news, some at city hall have claimed they need to hire MORE police officers with exorbitant pension promises so they can pay for the retiring officers. This argument fundamentally misunderstands how pensions work, imagining the fund as some sort of Ponzi scheme. It is not. Instead, employees and employers make contributions for each officer into a long-term investment fund.Moreover, Austin officers contribute far less than the city. So every new officer increases the city's cost and liability substantially (they become 100% vested after just ten years).The confusion perhaps is somewhat understandable. Social Security works that way: Money which people pay into Social Security today is directly used to cover benefits for current retirees. There's no long-term investment fund tied to individuals' contributions. Pension benefits, by contrast, are paid from the investment fund, not from current employee contributions.I don't know who's spreading this misinformation at city hall, but hiring more officers when the city can't afford pension costs for the current ones amounts to dousing a fire by tossing kindling on top. Will Rogers' advice Grits quoted yesterday remains apropos: "When you find yourself in a hole, stop digging."The largest cohort of former police officers receiving pension benefits are under 60 years old, with an average annual benefit of more than $70,000! By contrast, retired Austin officers in their 80s receive about $47k per year. (All this on top ofany military benefits, etc..)At present, Austin has 345 former officers in their 50s drawing more than 70k per year in benefits each, and more are added to their number all the time. (is only $63k!*) So things are about to get very expensive, very quickly.Calendar year 2018 was when the Austin police pension went from a status of problematic-but-salvageable to essentially broken. Unfunded liabilities ballooned from $415.5 million to $671 million. Exacerbating the problem, the pension fund is carrying about $89 million in losses on its books that will eventually require a downward adjustment.Those combined trends are why actuaries say APD's pension plan willcover liabilities at current contribution levels.And let me say it first: The city can't and shouldn't cover all of the shortfall. City Council should open the contract back up and adjust these lavish commitments downward, or else have police officers themselves contribute more.One final thought: Grits suspects there's an untold story behind the $89 million in un-recognized losses that deserves additional scrutiny, assuming any local reporters ever discover the story. According to the table in, Austin's police pension fund had 40% of its investments in "non-traditional" asset classes, which is the category that got the Dallas police fund in trouble. Are those the investments that are going south?Further, a few years ago,about the fund investing in several projects brought to them by two board members who were marketing themselves as consultants to companies seeking pension investments. They disclosed the relationships and abstained from voting, but the board had no rules barring such conflicts of interest and board members defended the practice.Between the fund making relatively large investments in non-traditional assets, board members out hawking themselves to potential investment clients, and $89 million in un-recognized losses sitting on the books, my Spidey-sense tells me there may be a significant story behind how the fund went from (ultimately) solvent to not in calendar-year 2018.