On November 4, 2014, Phoenix voters will cast their ballots and decide the fate of Proposition 487, a ballot initiative titled the “Phoenix Pension Reform Act.” Currently, the precise impact of this initiative, should it pass, is uncertain. The City of Phoenix, proponents of Proposition 487, various labor associations, and other experts have all analyzed the language of Proposition 487 and reached differing opinions. However, some things are certain – this ballot initiative is poorly drafted and will create more problems than solutions. Its implementation will cost City of Phoenix taxpayers millions of dollars, and its impact and scope will ultimately need to be determined by the court system, costing taxpayers even more. Because the passage of Proposition 487 would likely have a drastic negative impact on all City of Phoenix employees, including police officers, we urge you to get involved to defeat it. This memorandum is provided to ensure you have the information necessary to inform others about Proposition 487’s potential consequences and encourage them to vote no.
What is Proposition 487?
Proposition 487 is a voter initiative, meaning that the committee responsible for the initiative collected and filed the requisite number of valid signatures to get the initiative on the ballot. If a majority of Phoenix voters cast their ballots in favor of the initiative, it will become law.
CLICK HERE to read the quick fact sheet on Prop 487
The Citizens for Phoenix Pension Reform Committee, funded by “dark-money” groups Arizona Free Enterprise Club, Action Now Initiative, and Liberty Initiative Fund, is the major proponent of Proposition 487. “Dark money” refers to organizations that are not required to disclose the source of their funding. The particular groups involved in this campaign have given millions of dollars to get rid of public pension systems throughout the country and have the resources to generate a substantial campaign in favor of Proposition 487.
In essence, Proposition 487 eliminates the City of Phoenix pension system for all new employees and implements instead a defined contributing system. It contains the following five sections
Section 1 – Findings and Intent
Section 2 – Conflicting Provisions
Section 3 – Construction
Section 4 – Severability
Section 5 – Chapter XXIV, Phoenix City Charter, is amended by adding Part V
Only Section 5 will make it into the Phoenix City Charter. As discussed in greater detail below, because the language of Section 5 purports to affect every City of Phoenix employee and directly conflicts with the findings and intent outlined in Section 1 – which provides that the “Act is not intended to affect individuals who are members of, or are eligible to join, any other public retirement system in the State of Arizona such as the Public Safety Employees’ Retirement System” – there is much confusion as to how the City of Phoenix will proceed if Proposition 487 is approved.
CLICK HERE to read a complete copy of the initiative.
Proponents’ Arguments in Favor of Proposition 487 and Why They Fail
Proponents of Proposition 487 argue that the initiative will “fix” the City of Phoenix’s “broken” pension system and end pension spiking. They ignore, however, the fact that Phoenix voters reformed the City of Phoenix’s pension system just last year, a reform that will save taxpayers approximately $600 million over the course of the next 20 years. They also ignore the fact that pension spiking was abolished in the latest round of employee negotiations.
The Phoenix City Council issued a report earlier this year on the potential impact of Proposition 487 (a copy of this report is attached). Independent consultants and actuaries hired by the City of Phoenix found that instead of saving taxpayers money, the initiative would cost taxpayers $358 million over the course of the next 20 years to implement the proposed changes. The legal challenges the City of Phoenix will face if the initiative is approved would only increase those costs exponentially.
In addition to the financial burden it would impose on taxpayers, the passage of Proposition 487 would put the City of Phoenix at a competitive disadvantage when it comes to hiring qualified individuals. Public employers, such as the City of Phoenix, typically offer lower salaries than private employers but better benefits. Taking away the public pension system will eliminate those better benefits while the salaries will likely remain the same. This would reduce or even eliminate the incentive to work in the public sector.
The bottom line is that Proposition 487 will not “fix” anything. Instead, it will create more problems and cost taxpayers more money. Phoenix voters adopted a comprehensive and responsible reform initiative less than a year ago. As Councilmember Laura Pastor stated, we need to “give that initiative time to make an impact before we change the system again. For now, the council should focus on supporting public safety, community programs, strategic planning and reforming our budget process instead of a misguided attempt that could potentially gut our entire city budget.”
Why Should You Care?
Proposition 487 proponents have argued that police officers, firefighters, and anyone else eligible for inclusion in the Public Safety Personnel Retirement System (“PSPRS”) should not be concerned about this initiative because they will not be affected if it passes. They cannot, however, guarantee this. The initiative specifically provides that the new defined contributions system “shall be the only retirement plan offered to future hires.” (Emphasis added). It also provides that the City of Phoenix can make contributions only to the existing City of Phoenix Employee Retirement System or the new defined contributions system. Although Section 1 states the Act is not intended to impact those employees eligible for PSPRS, the proposed charter amendment (contained in Section 5) does not exclude public safety employees.
The City Council report concluded that the applicability of Proposition 487 to PSPRS is unclear and stated that “the City Council would need to receive legal advice and would likely be required to make a policy decision on continued participation in PSPRS. Any decision would likely face litigation.” What this means is that Proposition 487 has the potential to eliminate pensions for Phoenix Police officers and other public safety personnel. It also means that Proposition 487 has the potential to eliminate death and disability benefits for Phoenix Police officers and other public safety personnel who are killed or injured in the line of duty.
CLICK HERE to read the City Council report.
Because of the uncertainty as to Proposition 487’s impact on police officers, we need all of you to be actively involved in defeating it. Although we have been in contact with our attorneys and are prepared to join with a number of other associations and organizations in challenging the initiative should it pass, it is our hope it will not come to that. The more of you who participate in our efforts to spread the word about the negative impacts of Proposition 487, the more voters we will be able to inform, and the more likely voters will defeat Proposition 487 in November.
Officers along with their friends and families are highly encouraged to participate in the grass roots efforts to overturn this proposition by meeting at the Fire Dept Association offices located at 61 E. Columbus Av. In Phoenix on Saturday mornings at 9:00 am to participate in canvassing neighborhoods, distributing educational flyers, and posting signs. Call the PLEA office at 602-246-7869 to sign up.