Earlier this year, Goldwater Institute attorneys forced the City of Phoenix to end pension spiking practices among its public safety workers. Now they are now working alongside the city, and defending taxpayers, against a union lawsuit to reinstate the illegal ‘spiking’ practices.
“Pension spiking violates the plain language of state law,” said Goldwater attorney, Jonathan Riches, who led the winning lawsuit against the City. “The government unions are requesting that the Court order the City to reinstate illegal contracts. This audacious demand damages the trust between taxpayers and the public employees who are supposed to work for them.”
In July of this year the City of Phoenix removed ‘spiking’ provisions from their employee contracts, as a result of the Goldwater Institute lawsuit (Wright v. Stanton) filed last year. The new contracts that eliminated ‘spiking’ among public safety employees – and pension changes in contracts with other municipal workers – are estimated to save Phoenix taxpayers $233 million over 25 years; a savings of nearly $10 million a year.
Government unions are now suing the city, claiming that the contract changes are unlawful. The unions are requesting that the Court restore the previous contracts, including the pension spiking provisions that the city removed. “Our taxpayer clients have worked to eliminate pension spiking in Phoenix. We will continue to work to ensure this illegal practice does not ever recur again,” said Riches.
Pension spiking occurs when a retiring employee cashes in their benefits such as sick leave, unused vacation time, bonuses, vehicle allowances, uniform allowances and more in order to inflate their salary for pension compensation. While the practice is illegal in many states, it still occurs, often resulting in massive lump sum payouts and six-figure retirement salaries.
Under Arizona law, public employees are prohibited from using “unused sick leave, payment in lieu of vacation, payment for unused compensatory time or payment for any fringe benefits” to increase pension compensation.
Once actively encouraged by city officials, pension spiking has caused Phoenix’s public-safety retirement costs to explode, rocketing from $7.2 million in 2003 to nearly $130 million in 2014–more than a 1700 percent increase.
Additionally, money used for public-safety pensions can reduce funding for other city services such as; after-school programs, libraries, senior services and police on the streets.
If Goldwater attorneys are successful, taxpayers will immediately move to end the unions’ case and ensure that ‘spiking’ practices become a historical footnote in Phoenix, where it has been entrenched for over two decades.