Compromise state pension reform bill advances

Posted by AzBlueMeanie:

A compromise between House Speaker Kirk Adams, R-Mesa, and Sen. Steve Yarbrough, R-Chandler, and their respective pension reform plans passed the House Employment and Regulatory Affairs committee on a 6-3 vote, with Republicans supporting the bill and Democrats opposing it.

Once again, this legislature cannot do anything without inviting litigation. "Each committee member said they had concerns about whether the bill was constitutional. Those who voted in favor of the bill said they hoped that as it continues moving, there may be some more changes to make it more palatable." Adams and Yarbrough find compromise on rival pension reform bills. “This is the last week for committee hearings, so if this bill dies, so does pension reform,” said Rep. John Kavanagh, R-Fountain Hills.

To quote the TanMan, the Weeper of the House John Boehner, "so be it."

This is a flawed bill that needs more thoughtful drafting and input from the stakeholders. What's the rush? The state pension funds are not in crisis, despite the disingenuous ravings from Doug MacEachern at the Arizona Republic. Take the time to get this right. After all, the state of Arizona owes both contractual and fiduciary duties to the intended beneficiaries of the state pension funds.

Here are some of the details of compromise legislation. Adams and Yarbrough find compromise on rival pension reform bills:

The result looks a lot like Yarbrough’s original proposal: the cost of living adjustment (COLA) is not repealed, but awarded based on the health of the retirement system (only if the system is funded above 70 percent and the fund has been growing at greater than 8 percent over the past few years, probably to be set at seven years). The Deferred Retirement Option Program (DROP) is not dropped outright, but phased out.

The employee contribution rate for the Elected Officials Retirement Plan (EORP) and Public Safety Personnel Retirement System (PSPRS) will be increased at a much slower rate than Adams’ proposal. EORP members will raise their contribution rate 3 percent the first year, then 1.5 percent for two years until the final contribution rate is 13 percent. PSPRS members will increase their contribution rate at 2 percent for the first year and 1 percent for the next two, until the final rate is 11.65 percent. After those three years, the system will be re-structured so that employees are paying a third of their plan and employers are paying the other two-thirds.

The compromised bill also treats elected officials that are re-elected as new employees, a provision that Yarbrough joked at the committee hearing “is terribly popular in every circle that I’ve been in.”

It does integrate changes to the Arizona State Retirement System (ASRS), which Yarbrough’s proposal did not touch. The points system to allow ASRS members to retire once their age and years of service combined equaled 80 points, or 85 points for members hired after July 2011, is repealed, and employers of retirees who return to work have to pay an alternate contribution rate based on the health of the fund.

The intended beneficiaries of the pension funds, i.e., the "stakeholders," should be fully heard from:

Brian Livingston, executive director of the Arizona Police Association, set the tone for the discussion as the first speaker, saying flat-out that the authors of the bill had not given enough consideration to his and other critics’ concerns.

“For all those people that say we’ve had great stakeholder meetings, hogwash,” he said. He said that while he and others may have been invited to speak, no one had been listening to them.

Livingston’s testimony became so heated that Rep. Eddie Farnsworth, R-Gilbert, stepped in to interrupt him.

“Just because I disagree with you does not mean I have not been listening,” he told Livingston. The accusations that he and other legislators don’t care about teachers, policemen, firefighters or government staffers, he said, was “inflammatory and derogatory.”

Though Livingston apologized, he maintained that the pension reform debate was too focused on dollars and cents and not about the people who will be affected by these changes.

Speakers representing public safety employees argued that the strict requirements for COLA would mean that they were at the mercy of inflation for health care costs and insurance costs, by which they are disproportionately affected due to the dangers of the job.

Others balked at the fact that the amended bill would eliminate any credit for previous military service for new employees, saying that it would hurt their ability to recruit qualified public safety workers.

An education advocate said that by changing the formula for early retirement, the bill required teachers to work longer, until after they were past the point where they could be effective instructors.

Committee members mostly listened quietly, asking few questions and having little discussion over the bill or its amendments.

Since everyone agrees this bill needs improvement, why not table it for more discussion until there is a stakeholder consensus and bring it back in a special session, if necessary? Let's get this right. Don't be pressured into rushing through a flawed bill by the anti-union Goldwater Institute and its spear-carriers over at the Arizona Republic, or House Speaker Kirk Adam's self-interest in running for Congress.