As the City of Prescott seeks to increase its ability to pay down the massive PSPRS liability that looms over our city, I have been reaching out to mayors in other jurisdictions, all of whom are greatly affected by PSPRS. In June, I sent a letter to Governor Doug Ducey, requesting his support at the State Legislature for PSPRS reform. The letter was signed by 18 mayors. Here are excerpts from that letter:
Subject: Request for Executive Support at the State Legislature for PSPRS Reform
Dear Governor Ducey,
I am writing to respectfully request your support to encourage the Legislature to adopt further reforms to the Public Safety Personnel Retirement System (PSPRS). On its current trajectory, the System is an unsustainable burden to our hardworking taxpayers as well as an impediment to economic development.
I have convened two Mayoral Summits where mayors, mostly from rural municipalities, met and discussed this growing liability. The unanimous consensus among these mayors is that the Legislature must take further action to relieve the financial strain the municipalities face with their PSPRS unfunded liability.
As you are aware, the Legislature established PSPRS as a required, uniform retirement system for public safety personnel. Over time, the Legislature increasingly granted even more lucrative benefits into the System when the pension plan was over 100% funded. I understand that cities and towns were not consulted on the determination or affordability of these benefits, yet were expected to fully fund them.
While recent legislation has established a new pension category (Tier III) beginning 1 July, 2017, the unfunded liability of Tier I and Tier II members and their beneficiaries will continue for decades. The mayors attending these summit meetings believe the Legislature has no realization the crushing financial burden these pension costs have placed on their ability to provide adequate city services, including police and fire. For example, Prescott’s pension payment consumes 20% of its general fund budget. Even more alarming, the projected decrease in the Plan’s expected rate of return and the ensuing increase in our annual required pension payments will continue to put significant upward pressure on our general fund budgets.
While the municipalities are currently making their required payments to PSPRS, they are only doing so by greatly reducing staffing in all general fund municipal departments. In many cases, cities are also raising taxes to stave off insolvency. But this cannot last much longer. Just as you are reluctant to raise taxes, so are the mayors who have attended these summit meetings.
We request your support in the following three areas:
- Install the 9th member of the PSPRS Board who is an acknowledged representative of the taxpayer and who will help empower the Board to take a proactive approach to preventing increases in the unfunded liabilities within Tier 3 as well as existing PSPRS members.
- Take an active role to support the PSPRS Legislative Ad Hoc Committee and influence the Legislative leadership to address the critical issues of PSPRS.
- Request a review of the PSPRS administration and board is conducted to achieve implementation of greater accountability and cost reduction measures for both.
Future solutions could include considering the establishment of a PSPRS cost sharing method between the state and municipalities which brings the individual entities’ unfunded liability to a manageable level, as well as supporting a legislative referendum to eliminate the pension clause from the state constitution.
On behalf of all Arizonians, thank you in advance for your strong leadership on this issue.
Harry B. Oberg
By Harry B. Oberg
For a full copy of the letter, including mayor signatures, please contact the City of Prescott Communications Office at 928-777-1362, or email@example.com. QCBN