EXECUTIVE SUMMARY In a period when financial markets and institutions have appeared near collapse, the accounting methods used by public..
A recent Arizona Republic series revealed how some government employees are abusing Arizona’s pension systems by artificially boosting their salaries to collect a bigger pension, or by “double-dipping” – working while collecting retirement. That has strained Arizona’s pension funds. Unfortunately, even eliminating these abuses would still leave Arizona’s pension systems deeply in the red by more than $50 billion.
From Phoenix to Pima County, politicians and public-sector unions routinely agree to put union representatives on the government payroll, paying them millions of taxpayer dollars exclusively for union work, renewing these agreements year after year. And no wonder — everyone at the bargaining table wins: Unions secure funding and elected officials secure union support. But taxpayers — who have no seat at the table — lose.
Have you ever squeezed a balloon and had parts of it squeeze out between your fingers? Unless you pop the balloon with a pin, it will reemerge somewhere else when you squeeze it. Public employee pensions have become balloons, and abuse of public pension systems keeps oozing despite attempts to put the squeeze on it.
As the result of litigation brought by the Goldwater Institute in the Wright v. Stanton case, the unlawful practice of pension spiking among public safety workers, which had been entrenched in Phoenix for over 25 years, ended on July 1, 2014, when the City removed unlawful pension spiking provisions from their contracts with government unions.
The City of Phoenix’s public retirement systems are sinking further into the red, but that hasn't stopped the city and Mayor Stanton from encouraging senior police officers to spike their pensions in violation of state law. Phoenix’s contract with public safety workers permits employees to “cash in” unused sick leave, vacation leave, compensatory time, and other fringe benefits as salary in the years preceding retirement, thus inflating or “spiking” final salary for pension calculation purposes. Depending on the extent of the spiking, this can lead to significant increases in pension payments over the lifetime of the pensioner – or hundreds of millions of dollars in increased costs to Phoenix taxpayers. The Goldwater Institute is representing Phoenix taxpayers to stop this abusive and unlawful practice.
PHOENIX—Arizona’s three pension funds for government employees have predicted they will pay more in benefits to retirees over the next three decades than they will collect from worker paychecks and investments.
Arizona’s current public pension systems are costly, present needless risk to taxpayers, and drain tax resources from other potential uses. If policies are not changed, taxpayers will be on the hook to pay for these bloated plans far into the future, and other government programs may have to go on the chopping block to pay for pension benefits. Young employees, part of whose salaries are funding current pensions, are also at risk of never receiving the benefits they’ve already paid for if pension funds collapse under the weight of poor policy.
Government unions are trying to derail a series of common-sense reforms that would save taxpayers billions. During a rally at the Arizona State Capitol on March 1, 2012, union leaders bashed the Goldwater Institute and forward-thinking legislators for wanting to protect the pocketbooks of middle-class families in the state.
I’ll be blunt. Last year’s tepid reforms to the state’s pension systems were not enough.
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