Prescott And a Recommendation To Shut The PSPRS Pension Down
Prescott League of cities, towns pension reform plan goes to council
5-25-2015 The Daily Courier
In order to make Arizona’s public-safety pensions sustainable into the future, a task force of the League of Arizona Cities and Towns maintains that a comprehensive overhaul is necessary.
Among the recommended changes: Halting all enrollment in the existing Public Safety Personnel Retirement System (PSPRS), and starting a new plan for all future employees.
The details of the recommended pension reform – termed “The Yardstick,” by the League’s Pension Task Force – will be a topic of discussion by the Prescott City Council this week.
At its 3 p.m. Tuesday, May 26 meeting, the council will hear a presentation by representatives of the task force on recommendations for reform of the PSPRS. The meeting will take place at Prescott City Hall, 201 S. Cortez St.
The task force’s reform discussions have been under way since June 2014, and have yielded a three-page Yardstick document, which identifies recommended standards that any pension plan should follow to be viable.
A letter from Pension Task Force Chair Scott McCarty states: “The Yardstick identifies the goals, characteristics, and elements of a viable and sustainable public safety pension system for the State of Arizona.” It adds, “Also, as the name implies, it is an evaluation tool for the current system and reform proposals.”
The League’s evaluation maintains that the reform plan already proposed by labor representatives “is not comprehensive and, for the issues it addresses, does not do so correctly.”
On May 13, the Professional Fire Fighters of Arizona (PFFA) presented its reform plan to local officials in Prescott Valley. Its recommended changes include: cutting cost-of-living increases for retirees from 4 percent to 2 percent; a higher employee contribution to the system; and a requirement that employees work six years longer or turn 60 to be eligible for benefits.
The League Task Force recommends, on the other hand, that a new statewide system be formed for employees hired after July 1, 2016, and that all current employees and all current retirees remain in the existing system.
It also recommends that all system assets and liabilities be pooled, resulting in “shared risk across the broadest base.”
In addition, under the League task force’s plan, employers and employees would pay equal contributions. (That compares with the City of Prescott’s 2016 fiscal year, in which the employer’s contribution is estimated at 74 percent, while the employees’ contributions will be 11.65 percent).
The League task force is also recommending that the local boards that currently oversee the plan would be replaced with a single “committee of qualified experts.”
Prescott Deputy City Manager Alison Zelms said Friday, May 22, that the League’s plan attempts to avoid future legal challenges.
“The League is very adamant that we don’t want a repeat of the Fields case,” Zelms said, referring to the lawsuit that the Arizona Legislature’s 2011 pension reform faced.
In 2014, the Arizona Supreme Court ruled that the legislature’s 2011 move to eliminate the annual 4-percent cost-of-living increases to retirees was unconstitutional – causing the system to pay retroactive increases, which is contributing to the rising costs for Prescott.
The League task force maintains that the labor proposal would be subject to two legal challenges, because it applies to existing employees and retirees.
Zelms said the League task force’s recommendations are “very much in line” with the pension fixes that city officials have discussed. “Changing the whole structure is very important in staying sustainable,” she said.
Prescott has grappled with the rising costs of its public-safety pensions for years, and this year, is proposing a 0.55-percent sales tax increase to cover the estimated $70 million in unfunded pension obligations. The 20-year sales tax measure will be on the city ballot for the Aug. 25 primary.
Zelms and City Manager Craig McConnell said that regardless of the outcome of coming reform, Prescott still would be responsible to pay those costs.
“I think the bottom line is that there is almost no chance that reform will affect our existing liabilities,” Zelms said.
Meanwhile, they say, the League’s reform plan would help to ensure that the plan would remain healthy in the future. “It would almost self-police itself,” Zelms said of the recommended changes, “and we would have a plan that’s sustainable.”
The League’s pension reform would require approval by the State Legislature. Zelms predicted that pension reform would be a major issue in the Legislature’s 2016 session.