The gorilla that looms over the new year and beyond – Phoenix’s $3.4 billion unfunded pension liability – has prompted city Councilman Sal DiCiccio and an ex-congressman to push for a voter-driven charter change requiring better controls over spending.
Former Utah Congressman Jason Chaffetz and DiCiccio call their citizen initiative “Responsible Budgets,” part of a nationwide effort to address “the out-of-control, unpaid pension liabilities that are destroying cities from coast to coast,” according to a release.
“Unfunded pensions are the single greatest crisis of our time. It consumes the back halls in our nation’s Capitol, and yet virtually nobody is doing anything about it,” Chaffetz said, noting the problem affects all levels of government. “None of us have the means to pay for the promises we made.”
The Responsible Budgets Initiative calls for a three-part plan to force elected officials to make what Chaffetz and DiCiccio say are “hard choices necessary to avoid a financial collapse.”
It would require an annual accounting of city pensions, using the historical 10-year average rate of return and real-world business accounting principles as well as cap spending at population and inflation growth (with the exception of police, fire and first responders) until at least 90 percent of pensions are funded.
The third plank would steer “any extra money above population and inflation growth goes to pay down the city pension debt, starting with police and firefighter pensions, ensuring we keep the promises made to our first responders,” the two men said.
DiCiccio said Phoenix’s approach to pensions is based on two assumptions that are not “even remotely true. “Right now, we assume the average pensioner is going to only live to be about 70 years old, and that their fund returns a rate of at least 7.4 percent a year,” he noted.
“The public has not been told the truth as to how bad the real crisis is,” he charged. “We’re lying to ourselves and our citizens.”
He also charged that while “these flawed assumptions” show Phoenix with an unfunded liability of $3.4 billion, “the real number is far, far higher.”
He said “no one at City Hall…can tell you how much we really owe. It’s like if you’re making the minimum payment on your credit card, and you call them up to ask how much it will be to pay off your bill, and they tell you, ‘We don’t know, just keep making payments.’”
Chaffetz is the honorary chair of the national Responsible Budgets campaign, calling the pension problem “the greatest fiscal crisis of our time.”
“Almost every state, county, and city is drowning in pension debt that puts their very solvency in question, and there’s no one for cities to run to for a bailout – the federal government is in the exact same position,” he said.
The charter initiative will need about 14,000 signatures of registered voters in Phoenix to appear on the ballot. With a likelihood of a mayoral special election, the initiative could be on a ballot as soon as August 2018, DiCiccio and Chaffetz said.
“If we don’t do this now, we’re never going to be able to keep the promises we made. It’s time we require a responsible budget in the City of Phoenix,” he said.