FOR IMMEDIATE RELEASE: AMIDST PRESSURE OF LAWSUIT, CITY ENDS GROSS 'PENSION-SPIKING' ABUSES

Contact: Michael Kelley

(602) 633-8965

FOR IMMEDIATE RELEASE: AMIDST PRESSURE OF LAWSUIT, CITY ENDS GROSS ‘PENSION-SPIKING’ ABUSES

End to Corrupt Practice Will Save Taxpayers Millions

More than a quarter century of an abusive union practice known as “pension spiking” has ended, thanks to the resolution of a Phoenix lawsuit Friday. Officials for the City of Phoenix agreed to cease the practice in new contracts imposed on public safety unions as the result of a lawsuit filed by the Goldwater Institute last year. 

The Goldwater Institute’s lawsuit argued that pension spiking in Phoenix violates state law explicitly banning the practice.

Pension spiking occurs when a retiring employee cashes in their benefits such as sick leave, unused vacation time, bonuses, uniform allowances, vehicle allowances and more in order to inflate their salary for pension calculations. While the practice is illegal in many states, it still occurs frequently, often resulting in massive lump sum payouts and six-figure retirements.

Once actively encouraged by city officials, pension spiking had 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. In spite of the lawsuit from the Goldwater Institute, the Phoenix Police Sergeants and Lieutenants Association, who were also defendants, fought to keep the spiking calculations. But this spring, Phoenix’s city manager took note of the lawsuit, imposing a new contract that prohibited the unlawful payments to be used in calculations for pension purposes.

“This win does more than just put the pension system back onto a path towards solvency, it also starts to repair the trust between the taxpayers and their civil servants, especially those in the public safety sector,” said Goldwater Institute attorney Jonathan Riches, who led the lawsuit against pension spiking in Phoenix. “We will continue to work with taxpayers throughout the country to put an end to these abusive practices wherever they are occurring.”

As a result of new contracts that eliminate pension spiking among public safety employees (and pension changes in contracts with other municipal workers) taxpayers will save an estimated $233 million over 25 years – a savings of nearly $10 million a year.  

The Goldwater Institute’s pension spiking case has already driven changes in other parts of Arizona, with the City of Tucson specifically citing the pension spiking litigation for their decision to voluntarily end similar pension spiking among its public safety employees.  Tucson’s chief financial officer reported that ending pension spiking in Tucson will save Tucson taxpayers an estimated $1.2 million per year.      

Should Phoenix decide to revert back to paying illegally inflate pensions, taxpayers may return to court to enforce the clear language of state law and prevent pension spiking in the future.<o:p></o:p>

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To schedule an interview with Jon Riches, please contact Michael Kelly with the Goldwater Institute at (602) 633-8965 or mkelley@goldwaterinstitute.org. The Goldwater Institute has an in-house VideoLink studio for rapid cable hook-up if needed.