Prop 487 reviewed by citizens panel, roundtable announced

phoenix-moneyMorrison Institute for Public Policy will debut its First Thursday Roundtable series on Oct. 2, with the first topic focusing on Proposition 487, the Phoenix reform initiative (pros and cons), and results from the Citizens’ Initiative Review on the ballot measure.

Byron Schlomach, director of the Center for Economic Prosperity at the Goldwater Institute, will be presenting arguments in favor of Prop 487 and former City Councilman Tom Simplot, co-chair of Phoenix Citizens for Pension Responsibility, will be presenting arguments against Prop 487.

Prop 487 was examined for 3½ days by 20 participants who represented a sample of Phoenix voters based on demographic criteria. Neutral background panelists were Reilly; David Berman, Morrison Institute senior research fellow; Spencer Brien, assistant professor, ASU School of Public Affairs; and Phoenix Deputy City Manager Rick Naimark.

Panelists in support of the pension reform initiative were: City Councilman Sal DiCiccio; Christina Corieri, who works in DiCiccio’s office (but participated on her own personal time); and Byron Schlomach, economist, the Goldwater Institute.

Panelists in opposition to the initiative were: Cathleen Gleason, retired director of the city’s budget and research department; and Robert Klausner, a Florida attorney specializing in government pension issues.

After the days of review, Prop 487 was found to allow the city “more predictability in budgeting,” and “may help the City of Phoenix encourage business and job growth.” The panel reiterated the fact that “police and firefighters are covered under a state retirement program. They do not receive social security and are not intended to be affected by Proposition 487.

Supporters says that Prop 487 gives the voters a chance to make additional reform while continuing to honor previous commitments to current employees and retirees. Opponents are concerned that the proposition will prompt legal challenges due to the unclear language of the proposition 487.

Citizens’ Initiative Review of Proposition 487: Pension reform key findings:

● In 2013 Phoenix voters passed pension reform backed by both the firefighters and the business community. The measure raised employee contributions to their retirement accounts and required employees to work longer before getting a pension. Additionally, contract negotiations addressed many of the pension spiking concerns.

● Adopting a defined contribution plan for new city employees offers more control to the employee over their retirement plan. Under Proposition 487, the city will deposit an amount less than or equal to 8% of an employee’s salary, and the employee will have the option, but will not be required to contribute. This allows the city more predictability in budgeting.

● Transitioning employees into a 401K style defined contribution system can make city budgeting more predictable, which may help the City of Phoenix encourage business and job growth.

● Both sides expect legal challenges due to the unclear language of Proposition 487, which may delay the implementation of the Proposition and incur legal costs to the City of Phoenix.

● The City of Phoenix Employee Retirement System (COPERS) board retained legal counsel to review Proposition 487. Based on that analysis, they determined that only one section would not likely be challenged legally. According to that review, Proposition 487 will cost the taxpayers $350 million.

● When the City Council requested a full review of the entire proposition, actuaries found it would save taxpayers up to $500 million.

● According to city statistics, the average pension of a civilian City of Phoenix retiree retiring under City of Phoenix Employee Retirement System (COPERS) is less than $30,000 per year.

● In 2013, the City of Phoenix pension system was funded at 64% due to factors related to the economy. According to the deputy city manager, the City of Phoenix has been contributing 100 % of the actuary-recommended amount to the fund. If the fund remains at 64%, this could lead to cuts to city services and increased tax liability.

● Proposition 487 should end the practice of pension spiking, which is adding non-base compensation to the pension calculation. This results in significant savings to the city and taxpayers. The city’s own actuarial analysis shows that by limiting pensionable pay to the employee’s base salary may save taxpayers $385 million over the first 20 years.

These findings were agreed to by a supermajority of the citizen panel.

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