Three Cheers For Goldwater Institute Fighting Pension Spiking

The Goldwater Institute is threatening to sue the City of Phoenix in order to stop pension spiking.  According to the Arizona Republic,

State law says “unused sick leave, payment in lieu of vacation, payment for unused compensatory time or payment for any fringe benefits” cannot be used as compensation to compute retirement benefits.

State law also says that only “base salary, overtime pay, shift differential pay, military differential wage pay, compensatory time used by an employee in lieu of overtime not otherwise paid by an employer and holiday pay” may be used to calculate pension benefits.

This seems pretty explicit.  The City admits to using sick leave, vacation pay, and fringe benefit values (e.g. cars and cell phones) in the pension calculation.  So this seems pretty cut and dried.  The city is breaking the explicit letter of the law.

That Goldwater has a good case can be judged from the fairly lame defenses of Phoenix practices by local unions.  None seem to address the basic legal issue, but instead accuse Goldwater of "wasting taxpayer funds if it forced Phoenix to defend itself in court", a fairly hilarious attempt to claim the moral high ground of fiscal responsibility.

In fact, it appears that public workers believe  (and I think this is a fairly common belief) that their collective bargaining agreements trump state law.

John Teffy, a Phoenix Fire Department captain, said Goldwater should stand down.

“It seems to me that if the Goldwater Institute took the time to understand how the city works and how contracts work, they would know there is a much simpler way to address this than with (threats of) frivolous lawsuits,” Teffy said.

I did not understand this statement at first, but what I think he is saying is that since the "Contract" in his mind supersedes all laws, then the way to deal with this is through a contract renegotiation.  I think public workers see the writing on the wall and know that pension spiking is illegal, so they are hoping to handle this through a contract negotiation that just shifts this lost spiked value to workers in some other more legal form.  A great strategy for them, but a terrible one for taxpayers, who should not have to pay for the union's past illegality.

  • sean2829

    What a contrast to what is happening in the private sector. Last Friday, the Washington Post had an article on a private firm with a defined benefit pension plan. http://www.washingtonpost.com/business/economy/low-interest-rates-are-the-final-straw-for-many-company-pensions/2013/05/23/a83bf23a-adbc-11e2-8bf6-e70cb6ae066e_story.html The low interest rates pushed by Fed policy had reduced the corporate bond rates to such an extent that the company sponsoring the plan would have had to pony up a couple million dollars a year to meet slow growth rates indicated by corporate rates. That was more than a fifth of its payroll. (The plan was actually doing very well with it's stock market investments.) The upshot for the company was the plan had to be closed depriving these private sector workers of a reliable steady income in retirement.

    Whatever nonsense that Arizona public employees are trying to get away with it doesn't hold a candle to what happens in California. There are more then 12,000 CalPERS retirees getting more then $100k, 5290 from CalSTRS getting $100K and an undetermined number in the UC retirement system according to this document: http://sunshinereview.org/index.php/California_public_pensions There is no question who serves whom in the Golden State and I suppose the Arizona workers want parody.

  • NL7

    I interpret Teffy as being offended that outside groups are intruding in the natural ecosystem, not respecting the process and not paying homage to the right people. In other words, he seems to be implying that the contract negotiations are not meant to be challenged or trespassed upon by the general populace. "This is how it works; stop making waves and just pay attention to how we do it." Maybe I'm being too cynical.

  • Benjamin Cole

    Fire and police pensions are going to wreck local government in the many states, including CA.

    Essentially, going forward public employees have to be hired with zero contribution to pension plans by employers.