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Republican seeks to allow cuts in public pensions

Rep. John Kavanagh, R-Fountain Hills, smiles as he addresses the legislature in the Arizona House of Representatives at the Arizona Capitol Monday, Jan. 13, 2014, in Phoenix. The Republican lawmaker wants the state constitution amended to allow cuts to public employee pensions and increases in employee contributions if the systems are badly underfunded. (AP Photo/Ross D. Franklin)

Rep. John Kavanagh, R-Fountain Hills, smiles as he addresses the legislature in the Arizona House of Representatives at the Arizona Capitol Monday, Jan. 13, 2014, in Phoenix. The Republican lawmaker wants the state constitution amended to allow cuts to public employee pensions and increases in employee contributions if the systems are badly underfunded. (AP Photo/Ross D. Franklin)

An Arizona lawmaker wants the state constitution amended to allow cuts to public employee pensions and increases in employee contributions if the systems are badly underfunded.

Republican Rep. John Kavanagh introduced a bill that if passed would refer the proposal to the voters. He said in an interview he is targeting automatic cost of living increases but acknowledged nothing in his proposal would prevent cuts to existing pensions.

“This doesn’t remove the pensions, this simply says if the money’s not there the benefits have to be trimmed to make the system healthy. And employees were never promised” cost of living increases, Kavanagh said. But, “if the world was to flip into a recession, and we went into a depression, surely members don’t think that life will go merrily along in the public pension realm.”

House Minority Leader Chad Campbell said Tuesday there are funding problems with the state’s three major pension systems — a fourth for elected officials and judges was closed to new enrollment last year — but said there are ways to deal with that without removing Constitutional protections that bar diminishing promised payouts.

“Penalizing workers or potential workers who work for a public entity isn’t how you solve the problems,” Campbell said. “I’m not sitting here saying there’s not some problems to be addressed with public pensions and long-term issues, but these are not real solutions, these are political stunts.”

Kavanagh said that under his proposal payouts from the state’s three major pension plans would have to be trimmed and contributions from employees and employers raised if reasonable accounting practices found cuts were needed.

“These decreases are only triggered when it’s necessary to maintain the health of the system,” he said. “If the system doesn’t need the cuts you can’t do them.”

Just what would trigger the cuts, however, is only vaguely defined.

If the House and Senate both pass the bill, it would be placed on the November 2014 ballot.

Current state law does not allow existing pensions to be touched. The state’s biggest pension plan, the Arizona State Retirement System, hasn’t given a cost of living increase to retirees since 2005. The two others and the closed judge’s plan do, but they were trimmed by the Legislature under a 2011 law that is facing numerous legal challenges.

The Arizona Supreme Court heard arguments on whether the law unconstitutionally trimmed cost of living adjustments last year but hasn’t issued a ruling.

Many states are grappling with the problem of underfunded public pensions. A proposed ballot initiative in California would allow cities to renegotiate public workers’ future pension and retirement benefits. Oregon’s Legislature passed a law similar to what Arizona passed in 2011 that cuts future cost of living adjustments.

The issue isn’t just constitutional, but also touches on contract law. A promised pension is a contract, and cutting benefits would likely trigger a challenge on that front as well.

ASRS currently has enough money to pay about 75 percent of its expected pensions. The plan has $30.6 billion in assets as of 2012, more than $9 billion short of liabilities, but is generally considered healthy. As of June 2013 it had about 207,000 current members and 122,000 retirees drawing pensions.

The plan for public safety officers has just 57 percent of its expected liabilities, with $6.1 billion in assets and $10.8 billion in liabilities, a balance considered too low. The state’s plan for prison guards is at 67 percent funding, with $1.6 billion in assets and $2.3 billion in liabilities.

Changing the constitution to allow cuts to current and promised pensions doesn’t sit well with retirees, who could see their guaranteed month checks reduced.

“They act like we haven’t given anything,” said Sigrid Whitman, a retired educator who chairs the legislation committee for the All Arizona School Retirees Association. “The average pension is about $20,000 and we worked very hard and paid into it. Obviously we would be very upset if they put that on the ballot and it passed.”

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

9 comments

  1. Kavanagh fails to mention that sweeping reforms have already been placed on every pension plan in Arizona. For public safety, employee contributions have nearly doubled, payouts limited and eligibility ages raised. Other plans have made similar changes that need time to have the desired effects take place.This effort by Kavanagh uses the red herring term of “unfunded liability” in hopes to fear monger for political momentum and unlock the constitutional protections that serve as the last line of defense for employees against self serving special interest groups like ALEC the Koch money machine.

  2. This is another attempt by the crazy Republican field to screw teachers and other public servants who work very hard for very little recompense. At the same time these crazy Republican autocrats turn a nouns eye to people like Steve Yarborough, one of their own, who fleeces the public purse with his STOs. Get real Arizona and support those who have given their lives to educating, protecting and serving the general public. Protect them from self-serving ideologues who cafe little for our state.

  3. But this fascist nitwit has no problem collecting his own police pension from New York. This is the same moron who wants to ban pan handling and he wants to “save” our society from pre teen transgender students from entering the rest rooms of the gender they identify with. This creep should be thrown in a tax payer funded mental institution

  4. And yet, the legislature is ready to give corporations billions of dollars in incentives and lower tax levels. The legislature has stripped public education and yet given monetary incentives and tax breaks to charter schools, who have little accountability, less than adequate results and basically have a profit motive as their mission. These ideologues place reform at the feet of public servants who have paid into the system. Since the average pension of a retired school teacher is below the poverty line, what do they (legislature) think these pensioners can do to recoup the loss? McDonalds? WalMart? Or, maybe the corner of I-17 and whatever street. Or, in reality do they care at all?
    The consequences of these cuts to the elderly are not just financial. These are immoral acts perpetrated on a group of people who served and had a contract.
    People need to stand up for their constitutional rights. Public servants, active & retired, need to be active, participate in the legislative process. Join a group, call a legislator, show up to protest, address a petition. Do whatever is legal and right. Now!

  5. When we hired on with the Arizona State we signed to have retirement taken as part of getting the job like a contract. The State was to put aside their matching funds as we put ours in. Had the State lived up with their part this would not be a problem. Would the State legislator’s give up theirs first?

  6. How do we go about reducing our polititions benefits? Health , retirement pensions etc? I’d participate!

  7. Here is a link to a report on how much economic impact state pensions have in Arizona:
    http://www.nirsonline.org/storage/nirs/documents/factSheetsPreviews/Factsheet_AZ.pdf

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