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City of Phoenix Pension Plan Charter Amendment, Proposition 103 (August 2015)
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A charter amendment concerning city pensions was on the ballot for Phoenix voters in Maricopa County, Arizona, on August 25, 2015. It was approved.
Measure design
Proposition 103 was designed to curtail pension spiking and to address issues with the previous pension measure approved by voters in 2013 by setting a cap on what percentage of an employee's salary can be taken for his or her pension fund contribution. City officials estimated that the provisions under Proposition 103 would save the city approximately $38.8 million over 20 years. This measure was the fourth pension-related measure city voters had seen in three years.[1][2]
Pension spiking
Three provisions of the proposal were designed to curtail the practice of pension spiking.
- The measure implemented what was called a stacked hybrid retirement plan for new employees. The system was designed to cap pensionable pay at $125,000 per year, with a 401(k)-style plan for any additional pay above that threshold.
- The amendment also prohibited saved up sick leave from being used in pension calculations.
- It based pensions payments on employee salaries from the last five years of employment, rather than just the last three.
Employee contributions
The amendment limited the pension contributions of employees to 11 percent of their paychecks. The city was given the tax of making up the difference.[1]
This change was prompted by the consequences of Propositions 201 and 202, approved in 2013. The 2013 measure made employees responsible for half of their pension premiums. This amounted to an average of 15 percent of employee salaries in 2015, with estimates placing this number at as much as 17 percent in the future. According to city officials, this made recruiting and retaining workers difficult. City officials stated that this created a difficulty in hiring employees and keeping quality employees from leaving.[1]
City officials estimated that the provision limiting pension contributions to a maximum of 11 percent of paychecks would cost the city about $261.7 million over 20 years, a sum that was designed to be made up by savings allowed by other provisions of the proposal.[1]
Pension withdrawal
The amendment also reduced the guaranteed compound interest rate offered to employees who quit and withdraw from the city's system before retirement from 7.5 percent to 3.75 percent.[1]
Miscellaneous provisions and savings
The measure also made some other changes to the pension system, including technical changes and alterations to how new hires were to be treated.[1]
This measure was not designed to bring about the full transformation of the city's pension system to a defined contribution plan as a defeated 2014 citizen initiative would have.
Election results
| Phoenix, Proposition 103 | ||||
|---|---|---|---|---|
| Result | Votes | Percentage | ||
 Yes | 91,863 | 70.75% | ||
| No | 37,976 | 29.25% | ||
- Election results from Phoenix Elections Office
Text of measure
Descriptive title
The following descriptive title appeared on the ballot for Proposition 103:[3]
| “ |
Proposed Amendment To The Charter Of The City Of Phoenix To Reform The City of Phoenix Employees' Retirement Plan To Reduce City Expenditures By Changing The Terms Of The Plan For Employees Hired On Or After January 1, 2016, And Capping Contributions For Employees Hired On Or After July 1, 2013.[4] |
” |
Ballot statement
The following ballot statement appeared on the ballot for Proposition 103:[3]
| “ |
This is a proposal to amend the City of Phoenix Employees' Retirement Plan for new hires to: (1) limit compensation used to calculate pensions; (2) use a five year compensation average to determine pension amounts; (3) replace automatic post-retirement increases with an option to reduce initial pension payments to fund post-retirement increases; and (4) eliminate credit for unused sick leave. Additionally, this proposal would amend the retirement plan to: (1) cap future plan contributions for employees hired on or after July 1, 2013 at 11 percent of annual compensation, and (2) limit the interest rate applied to contributions refunded to withdrawing members.[4] |
” |
Ballot question
The following ballot question appeared on the ballot for Proposition 103:[3]
| “ |
Shall Chapter XXIV, Part II of the Charter of the City of Phoenix be amended as described to reform the City of Phoenix Employees' Retirement Plan?[4] |
” |
Full text
The full text of Proposition 103 is available here.
Support
Supporters
Jennifer Wozniak of the Laborers' International Union of North America, Local 777, stated that her organization supported the amendment.
The following council members voted in favor of putting this amendment on the ballot.[1]
Arguments in favor
Council member statements
Council member Michael Nowakowski, District 7, said:[5]
| “ |
Previous pension reforms created unintended consequences for new employees, making the city less competitive as an employer. New hires are required to contribute three times the amount of current Tier 1 employees and this contribution will increase unless reform occurs. To attract quality employees, we must offer a program that is comparable if not better, than other municipalities. For our city to continue providing outstanding service, we must employ outstanding individuals. My only hesitation is this reform does not change the Rule of 87 back to Rule of 85, which I have long advocated as another key element to remaining competitive.[4] |
” |
| —Council Member Michael Nowakowski, District 7[5] | ||
Council member Thelda Williams, District 1, said:[5]
| “ |
The community and business leaders who served on the Civilian Retirement Security Ad Hoc Committee unanimously recommended changes for the voters to decide on the August ballot. It should be clear that the proposed reform is designed to strengthen the City of Phoenix Employee's Retirement System (COPERS), not public safety employees. The committee examined several options for reform and their business-based recommendation is fair and allows us to retrain and recruit new employees. Although we have made significant reforms to save taxpayers hundreds of millions in pension costs, their unanimous recommendation will save taxpayers an additional $38.8 million. Combined with voter changes overwhelmingly passed in 2013 and measures to end pension spiking saving taxpayers nearly $830 million plus the recommended $38.8 million, taxpayers are projected to save $868.8 million.[4] |
” |
| —Council Member Thelda Williams, District 1[5] | ||
Vice Mayor Daniel Valenzuela, District 5, said:[5]
| “ |
As a co-chair of the ad hoc committee that created these recommendations, I proudly supported referring the initiative to the ballot. It was the right thing to do and is fair to our taxpayers, the city, and our employees. Over the next 20 years, these reforms will save taxpayers $38 million. While just two years ago, voters overwhelmingly supported reform that will save the city over $600 million, an effort I co-chaired, this latest recommendation guarantees the city will continue to be able to attract top-notch talent and ensure long-term retirement security for our employees while maintaining our ability to offer world-class city services.[4] |
” |
| —Vice Mayor Daniel Valenzuela, District 5[5] | ||
Opposition
Opponents
The following council members voted against putting this measure on the ballot:[2]
Arguments against
Council member Bill Gates, District 3, said:[5]
| “ |
I voted against the most recent pension reform proposal because it does not appreciably lower pension costs. It maintains a system where employees have a pension and a 401(k) and, for those employees who make over $125,000, it creates a second 401(k) plan. As opposed to nibbling at the edges, we need real pension reform at the city and state level that will protect the interests of taxpayers moving forward while keeping the promises that have been made to existing city of Phoenix employees.[4] |
” |
| —Council Member Bill Gates, District 3[5] | ||
Council member Sal DiCiccio, District 6, said:[5]
| “ |
The politicians are not telling you the truth about pension spiking. Pension spiking did not end and is still very much alive and well at the city of Phoenix for current and new employees. The media has done a very poor job reporting the facts on this issue. A report two years ago showed pension spiking cost taxpayers $19 million. The mayor and council resisted a plan by Councilman Gates, Waring and I that would have ended pension spiking for new employees only. But the liberal majority of the council wants to continue pension spiking.[4] |
” |
| —Council Member Sal DiCiccio, District 6[5] | ||
Path to the ballot
This measure was referred to the ballot by the city council in a 6-3 vote. The measure was designed to amend the city's charter and, thus, required voter approval to be enacted.[1]
Related measures
Other 2015 Phoenix measures
City of Phoenix General Plan Ratification, Proposition 100 (August 2015)
City of Phoenix Alternative Expenditure Limitation, Proposition 101 (August 2015)
City of Phoenix Electronic Payments Amendment, Proposition 102 (August 2015)
City of Phoenix Comprehensive Transportation Plan Funding, Proposition 104 (August 2015)
Pension measures
City of Phoenix Pension Reform, Propositions 201 and 202 (March 2013)
City of Phoenix Pension Reform Initiative, Proposition 487 (November 2014)
Recent news
The link below is to the most recent stories in a Google news search for the terms Phoenix pension reform Proposition 103. These results are automatically generated from Google. Ballotpedia does not curate or endorse these articles.
See also
- Local pensions on the ballot
- August 25, 2015 ballot measures in Arizona
- Maricopa County, Arizona ballot measures
- Phoenix, Arizona
- Phoenix, Arizona municipal elections, 2015
Other elections
External links
Footnotes
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 AZ Central, "More pension spackling coming to Phoenix ballot," March 6, 2015
- ↑ 2.0 2.1 AZ Central, "Another pension measure headed to Phoenix ballot," March 5, 2015
- ↑ 3.0 3.1 3.2 Phoenix Elections Office, "Ballot Form Ordinance for Election on August 25, 2015," accessed August 5, 2015
- ↑ 4.0 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
- ↑ 5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 AZ Central, "Phoenix leaders explain stance on pension initiative," March 13, 2015
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