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Pension Reform Proposal Sparks Debate

Pension Reform Proposal Sparks Debate

(KFYI News) – A pension reform initiative that will be on this November's city of Phoenix ballot is drawing markedly different interpretations of how it would affect the city's finances.

A group called Citizens for Pension Reform, along with the Arizona Free Enterprise Club, are behind the proposal.  They claim that switching city employees from the current pension-based retirement system (a "defined benefit" system) to a "defined contribution" 401(k) type of system will save the city significant money, as much as $470 million in the first year alone.

However, on Tuesday, city council members Kate Gallego and Daniel Valenzuela spoke at a news conference where they claimed the change would actually cost the city between $350 million and $600 million between the administrative implementation costs and discontinuing employee contributions to the current pension system, which would continue to have to make payouts to employees who are already retired.

"Because there is no employee match to continue the pension system as it is now," Valenzuela said, "people are still going to be drawing their pension.  And as they're drawing their pension from this pot of money that we're no longer funding, now do you propose that we do that?"

The two council members also claimed that the only way to save the city the amount of money supporters claim would be to make additional cuts in city employee pay – on top of a cut of 2.5% over the next two years that was approved by the city council last month – which would violate city employee contracts.

"We will be sued," Gallego said.  "There's a lot of precedent, and we will lose.  And it is not fair to tell taxpayers that they're gonna save that money when they're not."

 

 

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