Thursday, September 27, 2012

City Councilman Sal DiCiccio: Phoenix Pensions: No Reform/Slightly Better

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Phoenix Pensions: No Reform/Slightly Better
Tuesday, Phoenix marginally improved its pension system.  However, it failed to take reasonable and necessary steps toward protecting taxpayers and creating a stable retirement system for employees, the city and taxpayers.  Instead Phoenix modeled its plan similarly to the state and every other government plan in the country – the same plans that have failed and created fiscal problems everywhere they’ve been used.   
I really care about our employees and the services we provide the public, but the pension direction right now is unsustainable and doesn’t work for anyone.
The new Phoenix plan saves money, but long-term reform, as I had recommended, did not occur.
Taxpayers were not protected against the skyrocketing pension costs that have bankrupted cities throughout the United States.  I firmly believe and support a cap that limits taxpayer exposure. 
Pension and pension costs have eaten away at vital city services.  Cuts in after school programs, library and senior programs and pools are a direct result of high pension costs.  Money either goes to public service or to government servants.  It is not complicated.
Here are the facts:
  • $2 billion – the amount of money the pension plans are under funded.  That you, the taxpayer, are responsible for.
  • $12.6 million – the amount a 1% pay increase for all employees would cost the taxpayer.  (See Phoenix document.)  About half of government employees received a 4.8% increase every single year.  And yes, during the Great Recession the private sector saw cuts around 25%.
  • $100,980the average total compensation for over 14,000 employees,  Since ‘05-06, the cost per employee has gone up every single year.  And yes, this was given during the recession. (See Phoenix document.)  
Here are the solutions: 
  • Phoenix must adopt a pension plan similar to what the citizens have, similar to a self-directed 401(k). 
  • The culture of entitlement must come to an end.  Government employees need to understand you can’t have a great pension, Cadillac health benefits, pay raises every single year and guaranteed job security.  Something other than the taxpayer wallet has got to give. 
The new system (or the old one tweaked):
  • New employees will have to pay half the cost of their pension program instead the current 5 percent of salary. Right now, taxpayers fund their pension by paying more than 20 percent of employees’ salaries. 
  • Current employees still will pay no more than 5 percent of their salary and taxpayers have to pay 20 percent plus. Only new employees will be affected by paying half. 
Finally, more and more it appears the taxpayer will need to take pension reform directly to the ballot.  A taxpayer initiative is the road to real reform, not one driven by the government.
My best to you and your family,

Sal DiCiccio
City of Phoenix
Councilman, District 6
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