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Pension reform up to voters

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Posted: Tuesday, May 6, 2014 8:50 am | Updated: 8:45 am, Tue Jun 17, 2014.

A group of Phoenix residents has successfully gotten the issue of Phoenix pension reform on the November ballot.

The initiative seeks to end all forms of pension spiking and move all new city employees to a 401k-style pension system, eventually retiring the city’s old defined-benefit plan.

The city reviewed pension practices last year and passed reforms that they say will save the city $600 million, but crafters of the initiative say their plan will save even more and will be more sustainable in the future.

“A year ago, there was a pension issue on the ballot saving the city $600 million and that’s terrific, but what they didn’t say is there are plans out there to save a billion or to move over to a plan like this initiative that would have saved taxpayers a lot more money,” said City Councilman Jim Waring, who has openly come out in support of the initiative. “I voted for it because it’s better to save $600 million than nothing, but realistically we could have done a lot more. I argued for it and got nowhere... I’ve seen the half-measures the city has been willing to take. Clearly the most expensive course for taxpayers is to continue to do what we are doing now.”

Scot Mussi, executive director of the Arizona Free Enterprise Club, said the city fell short in several areas with their reforms.

“For starters they didn’t address the spiking, they didn’t address the abuse,” he said. “They didn’t address problems with the system. We have a pension fund that is $1.5 billion underfunded. It is only 56 percent funded. Pension spiking is costing tax payers $196 million. Nothing in their reforms addressed any of those issues.”

When the city was reviewing pension practices they presented an option that would move city employees to a defined contribution plan, like what is being proposed. At the time city officials said that option would be costly to set up and wouldn’t save money until many years down the road. Mussi believes that is not true and that is why his group decided to bring this to the voters.

“Our initiative, how it was crafted, will save taxpayers money on day one and will save taxpayers hundreds of millions over the next 10 years,” he said. “They’ll try to argue this will cost money. They’ll bring up the boogey man of transition costs. Those transition costs are actually paying off debt. There’s a $1.5 billion debt and the city, to honor the benefits they promised, needs to pay off that debt. In our initiative we provide the mechanisms to ensure that not only will they not experience any transition costs, but they’ll see savings on day one.”

The initiative will not affect current employees or public safety employees. All changes will be for new hires at the city and employees who opt-in to the new system.

Twenty-five thousand signatures were needed for the proposition to go on November’s ballot. In the end, Arizona Free Enterprise submitted more than 54,000, Mussi said.

For more information on the Arizona Free Enterprise Club, visit www.azfree.org.

• Contact writer: (480) 898-7914 or ahurtado@ahwatukee.com.

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