Sweeping pension reform goal of Arizona's House Speaker, no more 'double-dipping'

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by Catherine Holland

azfamily.com

Posted on February 8, 2011 at 11:07 AM

Updated Tuesday, Feb 8 at 11:14 AM

PHOENIX – Arizona’s Speaker of the House says the state’s pension plan is a “ticking time bomb” and he has a plan to defuse it.

Rep. Kirk Adams (R, District 19) is the force behind HB 2767, a major overhaul of the state’s foundering pension system that would, among other things, end the potential for “double-dipping” by requiring government employers like cities and school districts to make payments into the pension trust when they rehire employees who took early retirement.

Right now, Arizona’s four pension systems don’t have the money to pay for current and future pension liabilities. Adams intends to bridge that gap with a plan that will essentially cost public employees more for their retirement benefits while reducing the burden on the taxpayers.

If passed this session, some of the changes for certain newly hired employees will kick in in July, with the rest implemented in January 2012.

"At the mercy of increasing liabilities"

While Arizona’s thousands of state employees and retiree are expected to fight the reform, Adams said he is confident that many of his proposals will be adopted.

“We must protect those Arizonans who are counting on our pension system – the teachers, firemen and law enforcement officers – by seeking out and destroying the abuses that are draining and bankrupting their retirement,” Adams said in a news release. “Our pension system is a ticking time bomb ready to explode. If we don’t address its financial instability with these reforms, hard-working Arizonans will be on the hook and at the mercy of ever increasing liabilities. Meanwhile, our state’s bravest will face an uncertain retirement.”

No early retirement for elected officials

Under HB 2767, elected officials and judges would no longer be eligible for early retirement, nor would they be able to retire after 20 year of service if they are not of retirement age. It also reduces the retirement multiplier for elected officials to the same standard to which all other state employees are subject.

“This affects politicians,” he said. “No more will politicians be able to retire early, after five years of service, and collect a pension for life,” Adams explained. “Politicians will have to live by the same age requirements as the rest of state government in order to collect their pensions.”

Adams isn’t just introducing pension reform, he’s taking action himself. Adams has already opted out of his own state pension (Elected Officials Retirement Plan), giving up an estimated $260,000 in potential income.

HB 2767 also eliminates the point system that is currently in place, which combines age and years of service, replacing it with a set retirement age.

The changes do not end with elected officials’ pensions.

Repeal DROP and COLA

Right now, some state workers can receive lump-sum cash payouts for up to five years of service under the Deferred Retirement Option Plan (DROP). HB 2767 would repeal that, as well as the Cost of Living Adjustment Plan (COLA), which provides permanent benefit increases.

Finally, police officers, firefighters, elected officials and corrections employees would be required to pay more for their pensions. That increase would be made over a five-year period until the employees pay the same as the employers. At this point, only Arizona State Retirement System employers and employees pay equal amounts.

The last element of Adams’ 12-point plan calls for the Board of Investment to determine if it would be feasible and cost-effective to move public employees to a 401(k) retirement plan.

Hearings on the measure are expected to begin within the next two weeks.

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