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Dallas’s Threat of Bankruptcy and How Municipal Cases of Bankruptcy Can Force Government Employees to File for Bankruptcy in Mankato, MN

December 15th, 2016 · No Comments

In late November, reports covering the delicate financial situation of Dallas, TX, began to appear in several publications, including the New York Times. The possibility of Dallas filing for municipal bankruptcy has forced many individuals and small businesses tied into the city budget on the defense. Though Dallas is far from south-central Minnesota, its municipal bankruptcy case serves as a predictive tale for how the financial failure of a city’s government affects its employees. At Behm Law Group Ltd., we provide legal advice and assistance for government workers and other individuals filing for bankruptcy in Mankato, MN.

The 385 square miles of Dallas has experienced the fastest economic growth in the past 50 years out any of the 13 largest cities in the US. Unfortunately, that rapid expansion has caught up with the city budget, and Dallas will likely be filing for municipal bankruptcy in the new year. This situation will affect almost all government employees, including pension-earning police officers and firefighters.

The Dallas budget is estimated around $3 billion, and the city government is currently in need of an emergency bailout of roughly one third of the total annual budget. The problem stems largely from a retirement plan put into place in 1993 for police officers and firefighters. The plan offered the city’s public safety officials the opportunity to delay the standard retirement at age 50 and work for a few more years in exchange for a substantial bonus to their pension.

However, the idea that there would be a 5% employment growth each year with a 9% annual return on the new employees fell through, leaving the promised pensions with no support system. Twenty-three years later and this lack of financial balance left the city at a loss. Hints that public safety retirees would no longer be allowed to withdraw their pensions in large amounts caused a scare that pushed the withdrawal of around $220 million from the pension accounts.

This imbalanced pension system, in combination with several over-budget public projects, landed Dallas in the precarious financial situation the city government now faces. Dallas Mayor Michael Rawlings is now forced to consider filing for municipal bankruptcy to request a federal bailout.

The Dallas situation has been reflected on a smaller scale in several cities across the US, largely due to the city promising government retirees more than they can afford. Not only does the municipal debt affect those retirees, it also affects every other government employee and all entities associated with the government budget. Read more about the Dallas case here, here, and here. Contact Behm Law Group Ltd. at (507) 387-7200 for more information about your own financial situation as a government employee and for guidance on how to take steps to file for bankruptcy in Mankato, MN.

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