Proposition 124 to Change Arizona Pensions

After a victory at a special election held on Tuesday, Arizona’s Proposition 124 will be taking effect on January 1, 2017. The proposition will cut public service pension benefits in order to hopefully bolster the public service pension trust, which has about half as much money as it currently needs.

AZ Central has more on the proposition:

Starting Jan. 1, the measure will change the way permanent pension-benefit increases are paid to retirees. Supporters say Prop. 124 over the next 30 years will save $1.5 billion for the retirement trust for first responders. However, an Arizona Supreme Court ruling could throw a wrench in Tuesday’s electoral decision.

Prop. 124 will link retirees’ pension cost-of-living adjustments to the regional Consumer Price Index, with an annual cap of 2 percent. An annual 4 percent compounded increase has been paid out to retirees for the past two decades, significantly cutting into the amount of money remaining to pay future retirement benefits.

Although the measure will reduce pension benefits, first responders urged voters to back the plan in order to provide sustainability to a trust that has about half of the money needed to fund current and future pensions. The rising cost for public employers contributing to the PSPRS has caused some communities to curtail the hiring of additional police officers and firefighters.

The proposition was seen as a compromise after Lesko spent a year working with members and employers in the PSPRS. Opponents such as the Arizona Tax Research Association and the Goldwater Institute, which opposed having the proposition placed before voters, said the measure provides no short-term financial relief for taxpayers. Savings may occur only years down the road, they said.

The ruling on a pension-reform case currently before the Supreme Court will likely alter exactly how Proposition 124 is implemented. The case handles legislation passed in 2011, and could be the difference between tens of millions of dollars for Arizona. For more information about the case, read the full article here.