The Baltimore City Fire and Police Employees’ Retirement System (F&P) is navigating significant demographic challenges that impact its long-term sustainability. A major issue is the steady decline in the number of active employees contributing to the pension system, which is compounded by a rising population of retirees. This shift is further amplified by increasing life expectancies, which extend the duration of benefit payouts and strain the system’s resources.

As illustrated in the accompanying charts and graphs, F&P has observed a noticeable decline in active membership, alongside an increase in the number of retirees. This imbalance has intensified the pressure on the retirement system, which has now transitioned into a “mature” plan. In such plans, the number of retired benefit recipients exceeds that of contributing active members, signaling a significant demographic shift.

Over the last decade, these trends have become even more pronounced. The departmental breakdown shows that active membership is declining at a faster rate compared to the growth in retirees. Retirement membership has consistently grown at a quicker pace than active membership, reflecting broader workforce dynamics and an aging workforce. The accompanying graphs vividly illustrate this ongoing change.

One of the most notable trends over the past decade is the increase in benefit payments to retirees and beneficiaries. As illustrated in the accompanying charts, this increase is emblematic of F&P’s growing financial obligations and its steadfast commitment to its retired members. This demographic evolution underscores the need for strategic planning to ensure the system’s long-term financial health and stability.

Baltimore City funds three distinct pension systems: one for sworn fire and police employees, one for civil service employees, and one for elected officials. Pension contributions are classified as part of the City’s “fixed costs,” which are expenses the City is legally or contractually obligated to pay and cannot easily be reduced in the short term. As illustrated in the accompanying charts and graphs, the City’s fixed costs also encompass contributions to employee pension systems, healthcare for retirees, the State-mandated contribution to Baltimore City Public Schools, and debt service payments. These costs represent a substantial portion of the City’s budget, reflecting a notable increase from Fiscal 2022 and impacting its overall financial health (Baltimore City Bureau of Budget and Management Research, Summary of the Adopted Budget, Fiscal Year 2024, pp. 50-51).

The City has consistently provided substantial financial support to the F&P. In the fiscal year ending June 30, 2022, the City made a record-breaking contribution of $160.6 million—the highest annual contribution in its history. Although contributions dipped in fiscal year 2023, they rebounded in fiscal year 2024, with projections indicating a continued upward trend in the years ahead.

As illustrated in the accompanying charts, this consistent rise in annual contributions is not a recent phenomenon; over the last decade, the City’s financial support has grown significantly. While this sustained growth demonstrates the City’s commitment to the retirement system, it also presents a formidable challenge. Meeting these escalating financial obligations places a growing strain on the City’s budget, requiring meticulous financial planning and prioritization. Balancing this fiscal responsibility while addressing other critical needs is essential to maintaining the pension system’s long-term viability.

As illustrated in the accompanying charts, maintaining an adequate funding level is the cornerstone of any retirement system’s sustainability. This vital metric—the ratio of total accumulated assets to total liabilities—determines not only the system’s financial health but also directly impacts its capacity to meet future obligations. A higher funding level ensures that more funds are available for investment purposes, allowing the system to generate additional income.

For F&P, an adequate funding level is essential to instill confidence in its members by ensuring their future retirement benefits are secure. The system’s funding objective is to fulfill benefit obligations through a balanced combination of investment income, employer contributions, and member contributions. Meeting this objective is crucial to providing stable and dependable benefits for all members, even as the system navigates its evolving demographics and financial challenges.

The financial performance of the F&P investment portfolio has shown variability over the past decade, reflecting the inherent challenges of managing a mature pension plan. As the plan evolves, its financial health increasingly depends on investment returns, as outflows for retirement benefits continue to surpass inflows from member contributions.

In fiscal year 2024, the investment portfolio achieved a time-weighted rate of return of 9.8%, narrowly surpassing the median of 9.7%. This performance positioned F&P in the 56th percentile within the Investment Metrics Public Defined Benefit universe of $1 billion or more as of June 30, 2024 (F&P Popular Annual Financial Report, Fiscal Year 2024, p. 6). While this result highlights effective investment management, the portfolio’s reliance on investment returns underscores the need for careful, strategic planning to mitigate market volatility.

As illustrated in the accompanying charts, expenses have also increased significantly, rising from $229.2 million in fiscal year 2015 to $301.9 million in fiscal year 2024. This increase is primarily attributed to demographic shifts, including the growing retiree population and expanded post-retirement benefit payments. These trends underscore the importance of adopting proactive financial strategies to manage costs while preserving benefits effectively.

F&P’s total assets have experienced significant fluctuations over the past decade, reflecting the dynamic nature of the retirement system’s financial landscape. A notable surge occurred in fiscal year 2021, with total assets rising by 27.8%. However, this growth was followed by a 12.4% decrease in the subsequent fiscal year, highlighting the inherent volatility associated with investment performance and external economic factors.

As illustrated in the accompanying charts, in fiscal years 2023 and beyond, stabilizing asset growth must remain a top priority. Ensuring sustainable increases in total assets is crucial to maintaining a robust funding level and supporting the system’s long-term obligations to retirees and beneficiaries. Strategic investment practices and careful resource management will play a pivotal role in achieving these objectives.