‘Lesser of two evils’ pension reform bill amended in the House, returned to the Senate

Posted by AzBlueMeanie:

PublicPensions The state pension reform bill is House Speaker Kirk Adams’ (aka Captain Kool-Aid) big priority before sine die. He wants to screw public employees as a parting gift before he resigns his legislative seat to run for Congress after legislators wrap up the session. What a swell guy.

Adams' draconian state pension reform bill, HB2726, thankfully died, but he teamed up with Sen. Steve Yarbrough, R-Chandler, on his state pension reform bill, SB1609, considered to be the lesser of two evils by public employees.

The plan that emerged would make some significant changes to the public retirement systems: the Correction Officers Retirement Plan (CORP), Elected Officials Retirement Plan (EORP) and Public Safety Personnel Retirement System (PSPRS) and Arizona State Retirement System (ASRS). Arizona Capitol Times » Major pension reform appears on track to beat final adjournment (subscription required):

[P]ublic safety unions have been rallying against SB1609, calling for further concessions when it comes to members already in the systems.

And it seems state legislators have been listening.

“They get it,” said Mike Gardner, a lobbyist for the Public Safety Personnel Retirement System, which includes police officers and firefighters. “I think they understand that you can’t hurt those people that have played by the rules. That’s what it comes down to.”

The pushback from public safety unions was great enough that Adams had to walk away from many of the provisions of his original bill in order to win support for SB1609.

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Adams’ amendment [to the cost of living adjustment (COLA) formula] changed that formula. The cost of living increase is still awarded based on the health of the fund, but the funding level requirement is lower. As long as the system is 60-percent funded, retirees will receive a 2 percent increase. If the system is healthier, the pensioners will receive additional COLA increases, to a maximum of 4 percent per year. The change would take place once the current $275 million COLA balance in the PSPRS fund is spent, which staff estimates will be in 2013.

That concession was especially important, Gardner said, since the old language would have represented a huge hardship for PSPRS members who aren’t eligible for Social Security. Gas prices, health insurance premiums and other expenses will continue to increase, he argued, but the pension pay would have stayed the same.

“That is a death sentence for a lot of people,” he said.  “If you’re already retired and you’re not going to receive a cost of living increase for 15 years, you’ll probably be dead before you get any increase.”

The change also addresses the constitutional issues that Brian Livingston, executive director of the Arizona Police Association, told lawmakers would inevitably cause the reforms to wind up in the courts. Under Article 29 of the state Constitution, a benefit that has been agreed upon in a contract cannot be diminished.

Doing away with COLA for 15 years would have been a “blatantly” diminished benefit, Livingston said. Now, it’s become more of a technical question of whether changing the calculations — but preserving the benefit — would run afoul of the Constitution.

* * *

[T]he amendment [also] raises the [employee contribution] rate over five years. Rates will increase 1 percentage point the first year, then 0.9 percent, 0.8 percent, 0.7 percent and 0.6 percent each consecutive year. The final contribution rate will still be 11.65 percent, but it will just take longer to get to that point.

That’s a direct adoption of a suggestion from the unions. By stretching out the increase over five years instead of three, Arizona Highway Patrol Association President Jimmy Chavez said the economy would have time to improve so the members aren’t seeing a decrease in their take-home pay at the same time that police and fire departments are not giving pay raises and are instituting furlough days.

* * *

The amendment also stripped a provision from the bill that would have prevented law enforcement personnel from purchasing retirement credits for time they served in the military. Police unions balked at that one, arguing that it would make it more difficult to recruit from the pool of the most qualified candidates for police officer or firefighter jobs.

The bill will also change what it takes for state workers to qualify for retirement benefits… Adams’ amendment will allow 55-year-old members to retire if they have served for at least 30 years, or 65-year-olds to retire with at least 20 years of service. However, that would be the only way to reach the 85-point formula, so ASRS members would not be able to retire without at least 20 years of service.

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The bill will now be sent back to the Senate. If they concur with the House amendments, it will be sent to the governor.

Though union representatives are relieved to see the changes, they’re still disgruntled it wasn’t until the last minute before there was a compromise. Arizona Capitol Times » Union leaders credit governor for pension bill compromise (subscription required):

Jimmy Chavez, president of the Arizona Highway Patrol Association, said it was frustrating that the House Speaker Kirk Adams never reached out to him before presenting the bill. And although Sen. Steve Yarbrough did hold some meetings before introducing his version, Chavez said it didn’t seem like his or other union leaders’ input was being considered.

And Brian Livingston, executive director of the Arizona Police Association and one of the most outspoken critics of the pension reform effort, said that the bickering and bitterness could have been avoided if there had been more discussions from the start.

“I believe we could have satisfied all the concerns two months ago if there had been a true give-and-take,” he said. “It should not have led to a two-and-a-half month debate.”

* * *

But going with the less drastic bill wasn’t enough to placate the interest groups, who argued that they feel like they weren’t being considered enough in the process.

* * *

Livingston and Mike Gardner, a lobbyist for PSPRS, give the governor most of the credit for coming up with a compromise. Gardner said there has been a lot of back-and-forth in discussing the bill and what they wanted to do with it.

* * *

“The compromises that you see were a direct result of gubernatorial intervention,” he said. “Frankly, the association does not believe that either (the House or the Senate) reached out to us in a significant or proper manner.”

Let this be a lesson to you. Maybe next time the police and fire unions will support Democrats for office instead of the Republicans who ignored you and stabbed you in the back. And for the next 16 months you can make it your special project to see to it that Captain Kool-Aid loses his GOP congressional primary.

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