State Moves for Pension Reform; Voter Approval Needed

FOR IMMEDIATE RELEASE

February 16, 2016

PHOENIX – Governor Doug Ducey today signed bipartisan legislation that will preserve the state’s pension system for police and firefighters, lower the financial burden on public employers and bring needed predictability for hardworking, tax-paying Arizonans. Key elements of the plan require voter approval, and will go to the ballot on May 17.

“It’s been a long process, but the result is a bipartisan, well-informed and meaningful plan that will protect our taxpayers while providing a sustainable pension system for the women and men who risk their lives every day to keep us safe,” said Governor Ducey. “I’m grateful to Senator Debbie Lesko – who has been working closely with stakeholders and lawmakers to come up with a workable plan – as well as all the legislators who’ve stepped up to support it.  Today, we are one step closer to setting our pension system on a path to financial stability while improving the way it serves our brave cops and firefighters.”

The pension reform package, sponsored by Senator Lesko in SB 1428 and SB 1429, makes several changes to the current Public Safety Personnel Retirement System, which has long been seen as financially-strained and unsustainable for members and taxpayers alike. Key reforms, which affect new hires only, include:

  • Requiring new public employees to serve until the age of 55 before being eligible for full pension benefits, which will reduce costs to states and cities (taxpayers) and improve the sustainability of the fund;
  • Placing a hard cap on pension benefits for new hires to crack down on “pension spiking” and ensure predictability and accountability for taxpayers;
  • Splitting the cost of pensions 50/50 between employers and new employees to bring the system more in-line with other state retirement plans, ensure both sides have skin in the game and reduce risks to taxpayers;
  • Providing new hires the option of a 100-percent defined contribution plan, similar to a 401K, which allows for increased flexibility and portability of the employee’s funds (e.g. if they move out-of-state);
  • Tie cost-of-living adjustments for retirees’ to the regional Consumer Price Index, with a cap of 2 percent. In order for this change to apply to current members of PSPRS, it will require voter approval on May 17.

“Pension reform has been a crucial issue in Arizona for several years, and it’s become a huge passion project for me over the last year in particular,” said Sen. Lesko. “So, to see it pass through the Legislature with the bipartisan support of not only lawmakers, but also a broad coalition of stakeholders who once stood on opposite sides of the issue, is a huge victory. I’m thankful to my fellow legislators, for the police and firefighters who’ve worked tirelessly and collaboratively on this smart and sustainable solution, and for Governor Ducey’s vocal support along the way.”

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