by Lynh Bui - May. 1, 2012 09:33 PM
The Republic | azcentral.com
Plans to reform the Phoenix pension system could be delayed while city officials wait to see how an overhaul of the state employee system plays out.
The pension systems for Phoenix and Arizona employees are unrelated, but some reforms the city is considering are similar to state proposals that a judge recently ruled unconstitutional.
Phoenix officials say they are waiting to see whether the ruling will stand or face an appeal from the state before moving ahead on reform plans, which the city is pursuing to reduce program costs.
But some council members are urging quick action to avoid further delay in saving taxpayers money.
Reforming the Phoenix pension system requires a public vote to change the city charter. The city had hoped to get the issue on the ballot this November, but City Manager David Cavazos said that no longer may be feasible given legal problems the state has encountered.
At issue is whether public employers can force current employees to contribute more to the retirement systems or if the reforms can apply only to new employees. The difference would substantially impact the potential savings Phoenix could reap through the reforms.
Phoenix had estimated it could generate $140.3 million in cumulative savings by 2016 and over $1 billion in cumulative savings by 2031 if its proposed reforms applied to both current and new employees on the payroll as of July 1, according to a city report.
If changes applied to only those hired after the reforms were adopted, potential savings were estimated at $33.5 million by 2016 and $592.9 million by 2031, according to the March report to the City Council on pension reform.
In February, Maricopa County Superior Court Judge Eileen Willett said a law that went into effect July 1 requiring state employees to cover 53 percent of the contributions to the Arizona State Retirement System instead of 50 percent was unconstitutional.
State lawmakers approved the move hoping to save Arizona $60 million, but Willett ruled in favor of seven school teachers who sued.
She said the public retirement system is a contractual relationship between the state and its employees per the state Constitution and Arizona law forbids legislation "impairing the obligation of a contract." Under Willett's ruling, lawmakers could change the retirement system to impact only new employees. The state has 30 days from when Willett filed her written judgment on April 17 to file an appeal. But that appears unlikely.
The state House and Senate have passed House Bill 2264 that would nullify the reforms approved last year.
"The governor is expected to sign the legislation and there is funding in the proposed budget that would accommodate going back to a 50-50 split," said Brewer's spokesman, Matt Benson.
Phoenix Mayor Greg Stanton said the city should wait to see what happens at the state level. "The impacts of what we do for new employees will be significantly different if existing employees can contribute more to the pension system," he said.
But Councilman Tom Simplot said the city should move to reform the pension system even if the measures apply only to new employees. "Every month we wait is simply a larger debt burden on future generations," he said.
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