The lines have been clearly drawn for those in favor of the Phoenix Pension Initiative, who would like to see the city create a more sustainable pension system, and those against it, who say a dramatic change would cost taxpayers millions to carry out.
The initiative, which will show up on the November ballot, aims to end pension spiking and move all new hires at the city of Phoenix to a 401(k)-style pension. Those in favor say the system right now is costly for taxpayers and unsustainable. Those against it say it’s unnecessary and risky.
“Phoenix voters approved two sweeping overhauls to the pension system last year that are saving the city an estimated $600 million dollars,” said Tom Simplot, co-chair of the Phoenix Citizens for Pension Responsibility, the group opposing the initiative. “When we went to the voters in 2013, we rejected what is proposed in the initiative because it was determined to be too expensive to Phoenix taxpayers.”
Phoenix Citizens for Pension Responsibility’s other co-chair is retired city of Phoenix Budget and Research Director Cathy Gleason. Former Mayor Phil Gordon serves as honorary chair.
The group says the city already passed several measures in the past year to address pension spiking. A recent report from the city’s actuary, Cheiron, showed that the cost of implementing the ballot initiative would be up to $477 million over 20 years.
“As the former director of budget and research for the city, Phoenix can’t afford this radical initiative,” Gleason said. “This is a bad deal for both Phoenix taxpayers and city workers, most of whom receive modest pensions averaging less than $30,000 a year.”
Those in favor of the initiative, like City Councilman Sal DiCiccio, say the report is wrong.
“It goes back to the conflict of interest,” he said. “City staff hires their own people in order to create reports that they want to see in return. They don’t talk about pension spiking, stopping rollovers or ending payouts. It’s all designed under a conflict of interest because they hire them.”
DiCiccio said there are some parts of the initiative he doesn’t like but he thinks the two main points — stopping the current pension system and moving new employees to a 401(k) — will fix the problems and save the city millions.
He recently came out with numbers showing how much the top 50 retirees from the city of Phoenix over the last 10 years are costing the city.
“Fifty of the top retirees, which I consider the millionaires at the city of Phoenix, when they retire, will receive $183 million by the time they are 75,” DiCiccio said. “We found that average payout at retirement was $193,000 ... They get to cash in their vacation, sick leave and deferred compensation at a conservative number of $193,000 without any compounding in that. When you look at that, that tells you what the problem is at the city of Phoenix.”
The initiative is being organized by the Arizona Free Enterprise Club. Scot Mussi, executive director of the group, says the initiative will stop the abuse and will save taxpayers money from day one. Any cost, Mussi said, is actually the city paying off debt from the current system.
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