Tag: Phoenix budget

Are Phoenix Pension Costs Really Rising by $18 Million a Year?

Entering Arizona sign

Phoenix voters struck down a pension reform measure, Prop. 487, on Election Day. But in the weeks since the defeat, several local lawmakers have vocally called for a renewed discussion of pension reform.

Perhaps the most prominent of those voices is Phoenix City Councilman Sal DiCiccio, who supported Proposition 487 and wants the conversation about pension reform to continue.

The Councilman has claimed that the city’s pension costs rise by $18 million every year—and those costs will have a major impact on the funding of other public services.

Eighteen million dollars is a lot of money. But is that claim true? The Arizona Republic fact-checked the figure:

In 2011, state pension-reform laws raised the employee contribution to 11.05 percent, and it will continue increasing until it hits 11.65 percent in 2015-16. The city contributes whatever is needed to completely fund the pensions.

Poorer-than-expected investment returns on both pension funds during the recession raised the city’s contribution in recent years. In 2010-11, Phoenix spent approximately $93.9 million on general pensions, $60.4 million on police pensions and $30 million on fire pensions.

By the 2014-15 budget, the city’s planned contributions had risen to $129 million for general pensions, $91 million for police pensions and $46 million for fire pensions.

DiCiccio’s $18 million figure comes from a projection made before the city approved its budget. It forecast Phoenix would spend $271 million on pensions, $18 million more than it budgeted in 2013.

However, when the city finalized its budget, the numbers had changed. Phoenix set aside $266 million for pension contributions, $13 million more than in 2013.

So, the $18 million figure isn’t exactly right. But the sentiment of the statement is generally correct – the city’s pension costs have risen by millions of dollar each year.

The Arizona Republic also checked DiCiccio’s statement on pension costs hurting funding for public services:

Overall city spending on fire, parks and police has increased in recent years, but the city has also hired fewer police officers and firefighters. The Phoenix Law Enforcement Association estimates that the city has 550 fewer police officers now than it did at its peak employment in 2009.

The United Phoenix Fire Fighters didn’t have similar numbers available, but Phoenix went from 1,671 firefighters in 2009 to 1,578 in 2012.

Staffing cuts caused Phoenix police officers to expand their patrol areas, DiCiccio said.

Phoenix also delayed more than $200 million in capital bond projects in 2010. Voter-approved bond projects allow construction of new public facilities, such as parks or libraries, or renovating existing buildings.

Phoenix’s pension payments have grown at a steeper rate than funding for such services.

Overall, the Arizona Republic said DiCiccio’s statement were “mostly true.”

Phoenix Pension Measure Voted Down, But City Leaders Say Reform Debate Not Over

Arizona State Seal

On Tuesday, Phoenix residents handily voted down Proposition 487, the ballot measure that would have shifted most new hires into a 401(k)-style retirement plan.

The Mayor was an opponent of the measure and called it “too extreme”; but some Phoenix leaders, even the ones that didn’t support Prop 487, are determined to continue the conversation on pension reform.
From the Arizona Republic:

Mayor Greg Stanton called the victory one of the greatest comebacks in Phoenix history. The group advocating for Prop. 487 had a major lead in the beginning, according to polling by both sides, and outspent the city unions, but city workers took to the streets and seized on concerns it could negatively impact public-safety workers.

However, other city leaders said the outcome must not signal the end of the pension-reform conversation. They said the city still has work to do to address rising costs that add to its budget shortfalls, setting the table for a debate over alternative reforms in the coming months.

“If the fiscal problems are not fixed, you will continue to see more cuts in service and higher taxes and fees,” said Councilman Sal DiCiccio, a vocal supporter of the initiative. “It’s making it harder and harder to deliver quality services.”

[…]

Taxpayers’ tab for the city pension system, not including police officers and firefighters, soared to $129 million this year, up from $27.8 million in fiscal 2002. At the same time, the city raised taxes and fees and cut employee compensation to balance its budget deficits.

And the city will likely face another budget deficit heading into the next fiscal year. Its costs for all employee pensions increased by more than $18 million this year alone. City leaders expect that trend will continue, at least in the near term.

“Now it’s time for us to step forward and do some reforms,” said Councilwoman Thelda Williams, who opposed Prop. 487. “I just never believed that (ballot measure) was the mechanism for us to do it.”

But there are obstacles to pushing through a new reform measure, especially since the city passed one as recently as 2013. From the Arizona Republic:

Any efforts for additional reform could face push-back from some City Council and labor leaders who contend the city addressed the problem with a 2013 ballot initiative.

In 2013, voters passed a requirement that municipal workers hired after July 1 of last year split pension-fund contributions 50-50 with the city and work longer before retiring, moves expected to help save $596 million over 25 years, according to the city.

The city also took steps to combat the practice of “pension spiking,” generally seen as the artificial inflation of a city employee’s income toward the end of a career to boost retirement benefits.

Phoenix’s new contracts with its employee unions end the controversial practice of spiking for police officers and firefighters but only cap it for other city workers, saving taxpayers an estimated $233 million over 25 years.

Prop 487 was shot down by voters by a margin of 56-44.