Arizona Senate OKs police and fire pension plan

Posted at 3:48 PM, Feb 04, 2016
and last updated 2016-02-04 17:48:07-05

The full Arizona Senate on Thursday unanimously approved a proposal overhauling the state's badly underfunded public safety worker pension plan, sending the package to the House for action.

The Senate's rapid-fire action came without debate and all three of the bills enacting the overhaul passed on 28-0 votes.

If the House and Gov. Doug Ducey follow the Senate in approving the package, voters will be asked to approve the deal in May, because current retiree cost-of-living adjustments would be lowered under the plan from 4 percent a year to a maximum of 2 percent.

The issue is pressing because public agencies have seen contribution rates to the Arizona Public Safety Personnel Retirement System soar to make up for the underfunding.

Peoria Republican Sen. Debbie Lesko negotiated the deal with public safety unions and employers across the state, making good on a promise she made a year ago.

"I had told the governor and his staff a number of months ago my goal was to pass major pension reform and do it unanimously," she said as she explained her vote. "And I got some laughs and I got some chuckles, but hey, I think we're going to get it done."

House passage isn't as clear, as rumors of opposition have been rampant around the capitol in recent days. But neither Speaker David Gowan nor Appropriations Committee chair Justin Olson have commented on possible issues.

Lesko wants the bills on Gov. Doug Ducey's desk by Feb. 15 in order to be placed on the ballot at a previously set May 17 special election on education funding.

Besides changes to cost-of-living adjustments, major provisions include a new tier for newly hired police and firefighters that limits maximum pension payments and requires employers and employees to share equally in payments to retirement accounts. New hires also would be given a choice of opting for a 401(k) style retirement plan rather than a plan with a guaranteed pension.

Current employees pay about 11 percent of their pay into the retirement plan, but employer contributions aren't capped.

The system's current 49 percent funding status has led to massive increases in employer contributions, crimping budgets for cities and towns as their retiree contributions near 50 percent of salary. The Public Safety Personnel Retirement System plan has $6.2 billion in assets but $12.7 billion in liabilities.

The problems with the public safety pension fund have been growing for years. The Legislature tried to change how cost-of-living increases were made in 2011, but the courts struck that down as an unconstitutional cut in promised benefits.

Two other state pension funds, one for regular employees and one for corrections officers, are in better financial shape and no overhaul is immediately planned. The Legislature closed a plan for elected officials and judges to new members in 2013 because it was severely underfunded.