Phoenix Kicks Can on Mounting Pension Payments

The Phoenix City Council opted this week to put off paying part of the city’s annual pension contribution.

The city is facing higher contributions after a recent court decision struck down various pension saving measures this year.

But the Council, not wanting to severely cut services, has opted to phase in the higher payments – a move which comes at a cost.

From the Arizona Republic:

Because of an Arizona Supreme Court decision that struck down part of a state law meant to reduce pension costs, the city’s payments to the system are increasing by $40 million.

However, City Manager Ed Zuercher recommended that the city phase in those high payments over three years — a move that increases its long-term pension costs by about $69 million over 22 years.

Council members ultimately approved Zuercher’s $1.16 billion general-fund budget for the 2015-16 fiscal year.

Stanton and council members who supported the budget have said it makes sense to defer paying some pension costs because absorbing the full amount today could require drastic cuts to popular city services. The city would face a roughly $30 million deficit if it paid its full pension tab to the state next year, officials said.

“We’re here to provide those services,” Councilwoman Thelda Williams, a moderate Republican, told The Arizona Republic after she voted for the budget. “In the meantime, the economy could turn around, circumstances could change and next year, we might not even have a problem.”

Other councilmen were less supportive of the action, with one likening the budget to “using a credit card to pay off a mortgage”.

Photo credit: “Entering Arizona on I-10 Westbound” by Wing-Chi Poon – Own work. Licensed under CC BY-SA 2.5 via Wikimedia Commons