Adams ditches plan to end elected officials' pensions - East Valley Tribune: Arizona

Adams ditches plan to end elected officials' pensions

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Posted: Tuesday, February 8, 2011 1:34 pm | Updated: 12:59 pm, Wed Feb 9, 2011.

House Speaker Kirk Adams is scrapping his plan to end pensions for elected officials.

But future office holders could face far less generous retirement benefits.

Adams said Tuesday he still believes that most people who run for office - particularly the Legislature - do not deserve pensions. He pointed out the existing system allows anyone with just five years in office to start collecting benefits the moment they retire, no matter how young they are.

He said, though, that legislative analysts found out that ending the plan now, cold turkey, would cost Arizona taxpayers about $80 million a year in the near term.

That's because everyone already in office, from the governor through judges, city and county officials and even justices of the peace, would remain eligible for the generous benefits that let them collect 80 percent of their pay after just 20 years. But there would be no new money coming in to a plan that Adams said has enough assets to cover only about 65 percent of its obligations.

His proposal which lawmakers will consider this session is to continue the pensions, but on the same terms as he is proposing to alter the system that covers most other state employees.

What that means is that benefits accrue at no more than 2.2 percent a year. That compares with the 4 percent a year now for elected officials, a system that allows them to retire at 80 percent of their highest pay after just 20 years.

Potentially more significant, Adams is proposing that state workers - including elected officials - not be able to retire until they hit 65, or 62 with at least 10 years of service.

That change will affect more than just politicians.

Under current law, an employee is eligible for full pension benefits under a system that computes the number of years of service plus the worker's age: Once that total hits 80, then the worker can retire.

Adams said there is a double whammy to taxpayers from that.

First is the fact that these early retirees, some in their 50s, are no longer contributing to the pension system.

But what that also means, he said, is those employees can "double dip," collecting their pensions while going back to work for a public employer.

Adams said this has been an issue in particular for teachers who can end up back in the classroom while collecting pensions.

In the meantime, he noted, there's a double hit to the retirement systems: These rehired workers don't make pension contributions and they take slots that might otherwise go to new workers who would be paying into the system to support it.

Nothing in the package of bills Adams introduced would prohibit double dipping. But he said raising the retirement age until at least 62 should cut down on that sharply.

The Arizona State Retirement System covers not only state workers but also employees of counties, many cities, as well as those who work for public schools, community colleges and universities.

But none of this will affect existing employees, as a constitutional provision protects the benefits of those already in the system. Instead, this would affect those hired - or elected - after the end of this year.

Adams said, though, that as current workers retire, the new system will make the state's underfunded pension plans more actuarial sound

Also unaffected would be the approximately 30 percent of university employees who already participate in an alternative "defined contribution" system operated by private companies. There, the state provides a set amount of payments, with each worker's benefits depending on how well their accounts perform.

In fact, Adams wants to look at whether the entire state pension system should be converted to that, similar to the move by many corporations to scrap their "defined benefit" plans in favor of 401K retirement accounts with both employer and employees contributing.

He said the main benefit to the state is that the amount of the liability is known up front.

Adams already has voluntarily withdrawn from the elected officials retirement plan. He said there is no reason for legislators to get any sort of pension at all.

He said the system is so generous that if he leaves office at the end of 2012, after eight years earning $24,000 a year, he would immediately collect more than $6,000 a year in pension benefits - at age 39.

"That's not right," he said.

Adams said, though, he believes pensions are appropriate for those who make a career of public service.

"Let's say I'm Jan Brewer and I serve 27, 28, 30 years in state government and the people keep sending me back for various positions," he said. "Then I think there's a legitimacy to providing a public pension for that pension."

When Brewer finally retires she will immediately be eligible for a pension of $76,000 a year, 80 percent of her highest salary of $95,000 as governor. That does not take into account cost-of-living increases which have been approved in the past but Adams proposes to stop making automatic in the future.

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