Arizona Public Safety Pension – A Phony Crisis?

Pensioners First – According to the following article, the Tucson police union appears to think that the problems at PSPRS are manufactured or phony,  and that the numbers just don’t add up to a crisis.  We think the cops in Tucson have been at the gun range too much without their hearing protection as they have become financially tone deaf.

The cops are correct, the numbers don’t add up.  Subtraction is required.  These numbers are approximate, but you’ll get the idea.

$13.05 BILLION in pension liabilities

Subtract $7.7 BILLION (the money currently in the piggy bank/ 59% of what is required)

= $5.35 BILLION missing/ needed/ not there  (the 41% we should have, but don’t)

This is $5.35 BILLION that municipalities and taxpayers owe the public safety pensioners.  Let’s get real.  These guys and gals have earned it.

The problem is that it took 40 plus years of pension trustees (politicians) over-promising benefits and under-paying for those benefits.  How many decades will it take to catch up for what we already owe?  Most likely at least another 30 years.  This is the same as running up your credit card and only having 59% of the money needed to pay what you owe.  I’m sure the cops would agree that taking what you haven’t paid for is stupid, or theft, or both.

The Tucson police union just can’t understand how the decision recently handed down by the Arizona Supreme Court could negatively affect the public safety pension system.  Really guys?  You really need to read psprs W.R.O.N.G.S. – http://psprswrongs.com/2014/02/17/az-psprs-brian-tobin-conflict-1/

Arizona shouldn’t change pensioners’ benefits, but Arizona does need to figure out how to honestly pay for the benefits promised.

And now for the article-

http://m.azstarnet.com/news/local/govt-and-politics/government-pension-system-ruling-likely-to-hit-taxpayer-pocketbooks/article_c1855052-4d3a-5c55-b510-a981f630a86a.html?mobile_touch=true

Government pension system ruling likely to hit taxpayer pocketbooks

February 28, 2014 – AZStarNet.com – By Darren DaRonco

A recent Arizona Supreme Court decision overturning a 2011 law designed to keep pension costs down could cost Tucson millions of dollars.

Last week, the justices restored cost-of-living raises for retired members of the state’s Public Safety Personnel Retirement System, which includes police and fire personnel.

The ruling means the board that manages the fund will now reimburse retirees $40 million for past cost-of-living adjustments and will have to shift $335 million to a reserve fund to cover future cost-of-living increases, PSPRS system administrator Jim Hacking said in a release last week.

As a result, cities and counties will have to bear additional expenses.

The city’s fretted over ballooning pension costs even with the entire 2011 law in place.

Now that part of it is gone, Chief Financial Officer Kelly Gottschalk said pension costs will climb even higher.

But exactly how much higher isn’t known yet, she said.

“There’s a lot of unknowns on how it’s going to work,” Gottschalk said. “That (decision) makes it an all new ball game.”

While no one is certain how much the change will cost Tucson, a previous projection showed it could add an extra $11.5 million per year to the city’s public safety pension funds by 2027.

But the police union said both the state board and the city are manufacturing a crisis.

“We just don’t feel this is the crisis that some are making this out to be,” said Jason Winsky, government-affairs director for the Tucson Police Officers Association.

Winsky said the fund has earned double-digit interest on its investments two of the last three years, and that money could cover the $40 million in retroactive raises to retirees.

Since the rest is a shift from one account to a reserve account that will continue to collect interest, Winsky isn’t buying the pension system’s assertion that cities and counties will have to pony up significantly more each year to cover the transfer.

“We just don’t feel that giving retired people a cost-of-living adjustment is going to negatively affect the system,” he said. “The numbers to me just don’t add up.”

Winsky said the pension fund took some licks during the recession, but now that the economy has picked up, it’s returning to health.

Furthermore, the cost-of-living increase was only one part of the 2011 law. Other changes, such as increased employee contributions, remain in effect, Winsky said.

Although the contribution rates weren’t affected by the supreme court ruling, a separate lawsuit challenging those is pending.

Last week, the pension board predicted drastic increases for some municipalities. But this week, they backed off the claims.

A spokeswoman with the retirement system said an audit will be performed this summer to determine what rates municipalities must pay. The new rates will take effect on July 1, 2015.

FIXES NEEDED

Similar to many cities across the country, Tucson wants to reign in its public safety pensions.

Next year, the city anticipates paying $48 million for police and fire pensions, about a $4.8 million increase from a year ago.

Both pensions are below 48 percent funded, which translates into taxpayers being responsible for a combined $580 million in liabilities.

The low funding level means for every dollar the city pays police and fire employees in wages next year, it will have to pay about 50 cents towards their pensions.

Just over a decade ago, when funding levels were high, the city contributed $5 million a year towards police and fire employee pensions.

But that was before the recession struck.

Since then, slumping stocks, hiring freezes and retiring employees combined to put a strain on the retirement system.

Complicating matters is Tucson doesn’t control the public safety pensions, the state does.

But the city does have some options.

It could decide to eliminate allowing police and fire employees to cash in unused sick days, which costs around $2.6 million, and capping overtime, which costs about $9.5 million.

Mayor Jonathan Rothschild said in his State of the City speech Wednesday that the city was ready to make the tough choices to reign in police and fire pension costs.

But what actions are ultimately approved, and whether they will withstand retiree challenges, remains unknown.

Winsky said employees have surrendered many benefits over the last several years to keep the city afloat, but expects they will be willing to discuss pension fixes.

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