Pension overhaul moves to full House despite opposition

PHOENIX — The No. 3 Republican in the state House lashed out Wednesday at a plan to revamp the pension funds for police and firefighters, saying it’s a bad deal and should be scrapped.

Majority Whip David Livingston, R-Peoria, said there’s no need to ask voters to alter the system that determines what benefits are available to current and retired public safety employees.

He acknowledged the fund is about $6.6 billion in the red. But Livingston, a retired financial adviser, said legislation approved several years ago will reduce that figure to zero in two decades.

Mesa Mayor John Giles conceded the point. But he said that will occur only “assuming that we are still alive as a city.”

Giles, speaking on behalf of the League of Arizona Cities and Towns, said the schedule to pay down the pension deficits is forcing cities to cut back on other programs. And he said the numbers are so great that some communities could be forced to declare bankruptcy.

That contention was disputed by Justin Harris. He is the president of the Arizona Police Association, the one labor group representing firefighters and police officers that is not in support of the package.

Harris said his organization has no real problem with provisions that will change contribution rates and benefit packages for newly hired employees. But he strongly objected to a plan that would cap cost of living increases for current officers and those already retired at 2 percent a year.

The current system allows benefit increases of 4 percent, though that is contingent on the Public Safety Personnel Retirement System meeting certain earnings expectations.

While the fund has not met that target for the past two years, retirees have enjoyed 4 percent increases for two decades before that. And Harris does not want to foreclose that option.

Despite the objections, the House Insurance Committee approved the plan on a 7-1 vote. That sends the package to the full House, where there are likely more than enough votes for it.

But even if Livingston and Harris cannot kill the legislation, they have another remedy.

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They could persuade voters to reject the required constitutional amendment to make the change. And that defeat would change the dynamics of the package — and the savings to the system.

Central to the issue is the undisputed fact that the assets of the pension system cover less than half of its liabilities.

Sen. Debbie Lesko, R-Peoria, helped pull together various interests and came up with the two-tiered plan. She said the package, if approved, would put the pension fund on solid financial footing in 19 years.

Livingston, however, said that will happen within 22 years even without the change — and without cutting pension benefits.

The difference between what the Senate approved and what Livingston wants, however, goes to the question of whether cities will be able to save enough money to make those payments.

Rep. Karen Fann, R-Prescott, said the pension costs for her city have now risen to 75 percent of what they pay in salaries. And the cost is going up.

Livingston, however, was unmoved, saying how cities will meet their obligations is “a different issue.”

Fann said city officials tried to resolve the problem by asking voters to approve a half-cent hike in sales taxes. She said that was rejected.

“They think we’re paying too much to the pension programs for our public safety,” Fann said. But she said the message from voters was to find some other way to deal with the assessments being used to pay off Prescott’s share of the debt.

“The cities are trying here,” Fann said. “But they’re getting shot down.”

She said the reform plan approved by the Senate is the best way to resolve the problems.