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<h2 style="margin:7px 0 0 0; background:#CCCCFF; font-size:120%; font-weight:bold; border:1px solid #FFFFFF; text-align:left; color: black; padding:0.2em 0.4em;">Local elections</h2>
<h2 style="margin:7px 0 0 0; background:#CCCCFF; font-size:120%; font-weight:bold; border:1px solid #FFFFFF; text-align:left; color: black; padding:0.2em 0.4em;">Local elections</h2>
* [[March 12, 2013 ballot measures in Arizona|March 12]] • [[May 21, 2013 ballot measures in Arizona|May 21]] • [[November 5, 2013 ballot measures in Arizona|November 5]]
* [[March 12, 2013 ballot measures in Arizona|March 12]] • [[May 21, 2013 ballot measures in Arizona|May 21]]• [[August 27, 2013 ballot measures in Arizona|August 27]] • [[November 5, 2013 ballot measures in Arizona|November 5]]

Revision as of 14:24, 18 September 2013

Pension Hotspots: Phoenix, Arizona, and San Diego County, California Sep 26, 2014

By Josh Altic

The Pension Hotspots Report is a monthly publication about local pensions and pension reform efforts.

A new public citizens review process released statements about Proposition 487 in Phoenix in an attempt to clarify the pension reform initiative for voters. Meanwhile, in San Diego County, California, pension fund investors drew harsh criticism by placing all of the county's pension assets on the line in a new high-risk, all-or-nothing investment strategy, hoping to drastically boost the fund's health.

As of September 26, 2014, nine pension related measures have been proposed in 2014. Three of these have been approved and one was defeated. Court decisions removed the initiatives in Pacific Grove, California, and Ventura County, California, from the ballot, leaving three measures scheduled for voter decisions.

The state's first Citizens' Initiative Review releases pro and con statements about Phoenix Proposition 487:

In a new effort to clarify issues, a Citizens' Initiative Review process made its debut by reviewing Phoenix Proposition 487, a reform proposal for the city's underfunded pension system. The review was conducted by an independent panel of voters which investigated and discussed arguments in favor of and opposition to the measure and read the full text of the initiative and various analyses so the members of the panel are able to explain the nuances of the proposal in terms the average voter can understand. The review process was sponsored and organized by Arizona State University's Morrison Institute for Public Policy, which chose 20 panelists at random from diverse Phoenix demographics, including political parties, ethnicity, age and gender. A super majority of the panel voted to approve the following list of reasons to vote in favor and against Proposition 487:[1][2][3]

Reasons to vote in favor:

  • Proposition 487 makes future public retirement benefits more similar to private-sector retirement plans, leaving current benefits intact.
  • The initiative provides additional money-saving reform, while honoring previous commitments.
  • The city's pension system is only 64 percent funded, leading to increased taxpayer liabilities, which, if ignored, could lead to cuts in city services and increased taxes.
  • The 401(k)-style plan offered by Proposition 487 will give employees more control over their retirement plans.
  • Proposition 487 should end pension spiking by limiting pensionable pay, saving taxpayers as much as $385 million over 20 years.

Reasons to vote against:

  • Although Prop. 487 was designed to not affect police officers and firefighters, the impact on public safety employees is unclear, and the initiative could have unintended consequences.
  • Proposition 487 has some language that could prompt expensive litigation due to lack of clarity.
  • Proposition 487 is unnecessary because of 2013 pension reform and contract negotiations have already taken steps to fix the city's system.
  • Most city employees only receive moderate benefits, averaging $30,000 per year.
  • Proposition 487 was funded by money with undisclosed sources, specifically from the Arizona Free Enterprise Club.

Tyrone Reitman, executive director at Healthy Democracy, said of the process, “An incredible group of randomly selected voters from across Phoenix reviewed Prop 487, clearly demonstrating the value of this new public service to voters, whether it's on city-wide or state-wide level. We hope this project supports the voters of Phoenix during this election, while also charting a new course toward engaging voters in (ballot initiative) elections across Arizona.”[2]

Questions of risk vs. reward surround the all-or-nothing approach used by San Diego County's pension fund manager:

2014 Pension Measure Count
Number proposed:
Coming up:
Decided measures:
Number approved:
Number defeated:
States: California

San Diego County pension fund managers have come under fire from critics of their new method, which puts essentially all of the fund's assets on the line. Hoping for magnified profits in the event of good investment performance, but risking decimating loss in the event of negative returns, the investment group will be hailed as heroes if things go well. If investments go south, however, they will be reviled as villains and blamed for the county's potential financial downfall, since employees and retirees could wake up with almost nothing left in their fund.[4]

Salient Partners, the group managing the fund, chose to use high-risk, high-leverage investment under pressure to raise the asset-to-liability ratio of the only 79 percent-funded pension system. Leaders in the investment group made the ambitious decision to increase the fund's investment from 35 percent of assets to 100 percent. In other words, instead of risking only a portion of the fund on Wall Street ventures, Salient Partners is putting all of the fund's assets on the line.[4]

This strategy flies in the face of what other pension systems are doing. The city of San Diego, for example, is entrenched in a conservative, low-risk plan for allocating its money and the Los Angeles fire and police employees pension fund recently pulled all of its funds out of hedge-fund investments. CalPERS as a whole has moved away from large investments and risky futures since its devastating losses during the 2008 recession.[4]

While supporters call San Diego County's move brave and bold, opponents compare the move to a gambler putting his entire bankroll on the table, risking all his money on one bet. They go on to say that this move is even more irresponsible since the money and livelihood of others is at risk. The county invests $10 billion on behalf of more than 39,000 active or former public employees. On July 1, 2014, Lee Partridge of Salient Partners was authorized to spend the county’s entire $10 billion fund to put at least $20 billion at risk.[4]

Barry Ritholtz reported:

I am not fond of forecasts, so instead, I will offer one of two likely outcomes: Eventually, San Diego County’s pension fund blows up. The losses are spectacular, and the county taxpayers are saddled with billions in new tax obligations. Alternatively, the townsfolk figure out how much risk is being put on their shoulders, and fires everyone involved, from the pension board to the advisers to anyone who voted for these shenanigans.

I have seen this movie before. I know how it ends.[5]

—Barry Ritholtz[4]

Moreover, critics are careful to point out that the fund's management shares none of the risk it is imposing on the pension fund, since it receives an annual $10 million in management fees regardless of investment performance.[4]

...more local news

School bond and tax votes

Arizona requires school districts to hold elections for issuing new bonds or to override a school district budget. School districts are given up to five percent to override on a school district budget. Any override over five percent needs voter approval. Override is similar to exceeding a levy limit which is commonly called in other states. Arizona laws require school districts to have a substitute budget on hand in the event a budget override measure gets defeated. Arizona also has a debt limit protected by the Arizona Constitution with regular school districts having a six percent debt limit while unified school districts have a thirty percent limit based on the district's total value of taxable property.

Prescott Controversy

A controversy arose in the city of Prescott in late 2009 when residents tried to have an initiative placed on the November 3, 2009 ballot. The issue stemmed from the necessary signatures needed to put the initiative up for a public vote. City Clerk Elizabeth Burke told petition gatherers that they needed to get 2,058 signatures. This number represented 15 percent of the voters in the previous election. However, Gary Kidd, the City Attorney, disputed that the effort required at least 25 percent of voters' signatures.

The dispute began when officials pointed out that there was conflicting initiative procedures between the Arizona Constitution and the state statute. The initiative could appear on the November ballot, but legal action could be taken afterwards.[1]

A letter from Councilwoman Lora Lopas can be read here, along with other case-related document. In her letter, Lopas described her discontent with the way the situation on this issue was handled.

Laws governing

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Local elections






Arizona counties

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