Scottsdale Taxpayers to Pay $3.1 Million More For Police Pensions, Plus $1.4 Million For Healthcare

http://www.azcentral.com/story/news/local/scottsdale/2015/05/06/scottsdale-pensions-health-care-costs-expected-to-rise-more-than-5m/26869799/

Scottsdale pensions, health-care costs expected to rise more than $5 million

May 5, 2015  Arizona Republic

Story Highlights

  • Scottsdale’s costs for employee health-care coverage and pensions are rising by millions of dollars next fiscal year.
  • The council is working on its budget for fiscal 2015-16, which takes effect July 1.
  • To offset the increases in health-care, pensions and other areas, the city expects to bring in more revenues.

Arizona Pensions

Arizona Pensions

Scottsdale’s costs for employee health care and pensions are expected to rise by more than $5 million in the coming budget.

The city — and taxpayers — will pay an estimated $3.1 million more toward employee pensions in the Scottsdale Police Department, budget projections show. The spike is partially the result of an Arizona Supreme Court decision that struck down parts of a 2011 state law as unconstitutional.

In addition, the city is facing a $1.4 million jump in health-care costs for employees, according to budget officials.

The projections are included in the city’s proposed budget, which covers the fiscal year starting July 1.

MORE:Phoenix, other Valley cities, reel from pension spikes

“Health care is a continuing issue for us, even after as many efforts as we have taken to keep everything in check,” Mayor Jim Lane said.

Lane noted that the rising public-safety-pension and health-care costs are not under the city’s control. Cities across the Valley and beyond are facing similar situations as their pension and health-care bills continue to rise, requiring taxpayers to make up the difference, he said.

Scottsdale is projecting increases in revenue sources, such as sales taxes, that will help cover the higher costs.

For that reason and others, City Manager Fritz Behring said Scottsdale is “in pretty good shape” budget-wise. The economy has improved, “but the Council still has to be careful about how they spend each dollar,” he added.

Budget Director Judy Doyle said several factors are fueling the health-care increase, such as increased use of high-cost specialty drugs; fees and regulations from President Barack Obama’s health-care law; more smaller-cost claims; and ordinary medical and pharmacy price increases in the market.

Lane said $255,000 of the spike for health care is a result of requirements in Obama’s Affordable Care Act.

“It’s essentially a charge to cover those who are not insured,” he said.

Scottsdale and employees both contribute money toward pensions for police and fire employees in the Arizona Public Safety Personnel Retirement System.

Employee contribution rates are set by state statute. Employer contribution rates are set each year based on the employer group’s annual actuarial valuation, according to PSPRS.

The cost is not evenly split, with Scottsdale contributing a larger percentage based on the established rates, Lane noted.

Currently, the city contributes about 28.4 percent, compared with employees’ 11.05 percent.

Next fiscal year, Scottsdale will contribute 35.53 percent, vs. 11.65 percent for employees.

Police pension costs also will rise because of an increase in overtime and a Council-approved step pay program for police employees.

Scottsdale also expects to pay an additional $500,000 toward the retirements of employees in the Arizona State Retirement System, which covers most of the city’s remaining workforce.

The rates are actually decreasing for the Arizona State Retirement System, but the dollar impact will rise because of increased wages.

The figures were provided by the city’s budget director.

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