Tag Archives: pension

Phoenix Pensions On The Ballot Again


Pensions are going back on the ballot in Phoenix, the third time 4 years.

Phoenix has pension problems. The city employees pension system is seriously underfunded. It all comes down to math and politics. Numbers don’t lie but politicians do. To avoid owning up to the pension problem the city council is sending another short term fix to the voters.

Phoenix voters were asked in 2012 to approve a pension reform package. The 2012 package resulted in new hires paying half of the required pension contribution. A good idea, but because the pension fund is seriously underfunded the annual required contribution is higher than it has been in past years. This resulted in new hires being required to contribute 15% of their pay to the pension fund (it’s expected to go up even more,) this is on top of social security withholding and other paycheck deductions.

In 2014 petitions were collected for a ballot initiative to require new employees be enrolled in a 401k style defined contribution system. The city council opposed the measure and  wrote a deceptive ballot title. Police and fire fighters who would not have been impacted by the measure campaigned against it. Measure 487 was defeated last November.

Now the city council is proposing another pension reform ballot question. The new proposal will cap pensionable income for new employees at $125,000 per year, and cap employee contributions to the pension system at 11%. This is not going to fix the problem. Unfortunately for taxpayers, politicians are more interested in kicking the can down the road than providing a sustainable retirement option to city employees.

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The Truth about Phoenix’s Pension Fight

The Arizona Republic, the state’s largest newspaper, endorsed a YES vote on Proposition 487 in an editorial entitled, “Phoenix punted on pensions, Prop. 487 doesn’t.” The proposition, which will be on this November’s ballot, would prevent abuses of the system, known as “pension spiking,” and create a 401(k) style retirement program for new city employees.

Liberty Initiative Fund has been a major donor to the Prop 487 campaign.

The Republic editorial makes a number of important points:

“Phoenix officials had it in their power, once, to stave off Proposition 487, which ends traditional pensions for newly hired civilian employees.

“They declined. Actually, they did worse than simply decline. Faced with an increasingly expensive system that has been grossly abused by Phoenix’s highest paid and most influential retirees, the Phoenix City Council in 2013 proposed to voters changes that in some respects have made the system worse.”

“City leaders, for example, could not bring themselves to truly end the inappropriate practice of pension spiking, the artificial, end-of-career pay boost that helped balloon former City Manager David Cavazos’ annual pension to $232,000. Prop. 487 will.”

As for Prop 487, the paper wrote:

“Prop. 487, which would replace the pension with a 401(k)-type plan, is not a cure-all for past mistakes. It will not fix all of Phoenix’s growing pension woes. . . .

“But, in the end, these dramatic changes will give Phoenix control over skyrocketing pension costs that threaten to strangle the city’s ability to provide the services Phoenix residents have come to expect.”

The entire editorial can be found here.

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