The City of Fort Worth had its bond rating recently downgraded by S&P Global Ratings who cited “the city’s rising pension liabilities and pension contributions below actuarially determined levels.” More specifically, S&P expressed concern over the Ft. Worth Employees’ Retirement Fund’s 42.4 percent funded ratio and its $3.1 billion unfunded liability. S&P’s recent action comes on top of an earlier downgrade by Moody’s Investor Services in 2017.

While Fort Worth is trying to remedy this issue by increasing pension contributions by two percent over the next two years, S&P anticipates that “contributions are still expected to fall short of the actuarially required levels and unfunded liabilities are expected to rise” into the future.

Unlike other state-governed systems, the city has a fair amount of discretion over the structure and operation of the municipal plan. Per the Pension Review Board, here’s a synopsis of the city’s benefit and decision-making capabilities:

Source: Pension Review Board’s Guide to Public Retirement Systems in Texas: 2017

Even still, the city hasn’t been able to get its retirement plan on sound footing, as evidenced by its growing pension debt and bond rating downgrades. None of this bodes well for taxpayers or retirees, especially those on low- and fixed-incomes, who face the prospect of higher taxes, fewer services, reduced benefits, or some combination of the three. Sadly, all of this is yet another reminder of the inherent instability and unsustainability of the defined benefit system—and the need for change.