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Major pension reform bill headed to Governor’s Office

Sen. Steve Yarbrough (Photo by Ryan Cook/RJ Cook Photography)

Sen. Steve Yarbrough (Photo by Ryan Cook/RJ Cook Photography)

The Senate beat the sine die clock on Monday to pass legislation that contains major changes to the state’s pension systems.

The measure, which backers said would head off a collapse of the public pension programs, advanced on a party-line vote, 21-9.

Republicans backed the bill while Democrats balked at it. The bill’s next stop is the governor’s desk.

The measure is among a handful of ambitious undertakings the Legislature set to accomplish this year in addition to balancing the budget and enacting legislation meant to attract and keep companies in Arizona.

The successful push to pass SB1609, the pension bill, means the end of the session is just around the corner.

Senate President Russell Pearce indicated today it is likely that the Legislature will adjourn ~sine die~ tomorrow.

Sen. Steve Yarbrough, R-Chandler, author of SB1609, defended the measure.

“They are in keeping with our constitutional obligation to care for the stability of the public retirement systems,” Yarbrough said, adding what backers rejected is the idea of standing idly by while the programs are headed for bankruptcy.

The plan makes 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).

The legislation’s success has also been a priority for House Speaker Kirk Adams.

As expected, public sector unions pushed back against the measure, and backers had to walk away from many of the provisions.

During floor debate in the House on April 14, Adams offered an amendment that made significant concessions to some of the unions’ concerns.

For example, under the original version of SB1609, a cost of living adjustment (COLA) would be 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 a rate greater than 8 percent during an indeterminate number of years. Staffers estimated that the provision would mean COLA would not be awarded for 15 years.

Adams’ amendment 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 two percent increase. If the system is healthier, the pensioners will receive additional COLA increases — up to a maximum of four percent per year. The change would take place once the current $275 million COLA balance in the PSPRS fund is spent, which staff estimated would be in 2013.

That concession was especially important since the old language would have represented a huge hardship for PSPRS members who aren’t eligible for Social Security, said Mike Gardner, a lobbyist for the Public Safety Personnel Retirement System.

Gas prices, health insurance premiums and other expenses will continue to increase, but the pension pay would have stayed the same, Gardner said.

The change also addresses the constitutional issues that Brian Livingston, executive director of the Arizona Police Association, said would inevitably wind up in court.

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.

During the debate in the House, Democrats criticized the bill as being “rushed” and that the legislation would be too much of a burden for members of the public retirement plans.

“There is plenty of time for consideration,” Rep. Tom Chabin, D- Flagstaff, said. “There’s plenty of time for thoughtfulness and there’s plenty of time for analysis.”

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