/ Modified apr 27, 2016 9:33 a.m.

Prop 124: State Pension Reform May Ease Taxpayer Burden

Retirement fund for police officers, firefighters is $7 billion underfunded.

firefighters spotlight Firefighters in Tucson battle a house fire, 2016.
Christopher Conover/AZPM

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Arizona’s pension fund for police officers and firefighters is more than 50 percent underfunded. The problem occurs all across the country, and in Arizona, it is a drain on state and local government resources.

Prop. 124 would amend the state Constitution to set a cap on the annual cost of living increase of 2 percent for public safety retirees. The cost of living rose about 4 percent a year for the last decade. Under the proposal, cost of living increases would be indexed to the Consumer Price Index for Phoenix.

The pension has been underfunded by $7 billion in the last decade. The current state budget is worth a little more than $9 billion.

The fund is not in danger of running out of money right away, it is a long term issue. State and local governments have the money to pay for pensions now, but in the future, unless changes are made, that will be a problem because the pensions must be paid.

“The state Constitution guarantees benefits promised to employees and retirees. The state Constitution says you cannot damage or impair those benefits,” said Jun Peng, a University of Arizona professor of public administration.

The underfunded pension has become a burden that has grown increasingly worse since the economic downturn.

State government runs the pension fund, but local governments pay into it on behalf of their employees. So long as it is underfunded, the employers pay more.

“In fiscal year ’09 on our police pension, we were paying 29 percent of every dollar a police officer made,” said Tucson Assistant City Manager for Finance Joyce Garland.

“Next year, in fiscal ’17 we’ll be paying 61 percent, so 61 cents for every dollar that they make,” she said.

Police and firefighters unions support Prop 124 and the accompanying legislation.

“Because the retirement system, as it stands right now, has about half of the assets it needs to be able to pay for those benefits that have been promised to police officers and firefighters in the future,” said Jim Mann, executive director with the Fraternal Order of Police.

Prop 124 was put on the ballot by the state Legislature. It has no organized opposition.

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