Phoenix pension campaign backers are sharing false information
THE MEDIA: Web
WHO SAID IT: Responsible Budgets, a political campaign supporting Proposition 106
THE COMMENT: “Every Phoenix family owes $13,290 in unfunded pensions.”
THE FORUM: The Responsible Budgets campaign website
WHAT WE’RE LOOKING AT: Does every household in Phoenix owe $13,290 in pension debt?
OUR RATING: No stars: False ANALYSIS: Phoenix will hold a special election on Aug. 27 to decide two major issues.
Proposition 105 would end the expansion of light rail while Proposition 106 aims to limit city spending until pension debt is significantly reduced.
The campaign in support of Prop 106, Responsible Budgets, brings awareness to underfunded public pensions. Phoenix has more than $4 billion in unfunded pension debt.
That means the city doesn’t have the assets to cover the full cost of benefits it owes to its retirees.
The City of Phoenix Employees’ Retirement System (COPERS) manages retirement benefits for city employees. The city’s police and fire departments receive retirement benefits through a state-run system called the Public Safety Personnel Retirement System (PSPRS).
COPERS’ pensions make up 36% of Phoenix’s unfunded pension debt, while police and fire make up about 64%.
Last year, Phoenix spent $376 million on city employees’ pension benefits. This year, the city plans to spend $426 million.
Passage of Prop. 106 would require the city to put any excess funding toward pension debt, end pensions for city council members, create annual pension debt assessments and prevent new city spending if pensions are not 90% funded.
As part of the campaign for Prop. 106, Responsible Budgets has circulated figures about what the pension debt means for Phoenix taxpayers.
On their website, the group claims, “Every Phoenix family owes $13,290 in unfunded pensions.” It’s not clear how the group arrived at that figure.
According to the City of Phoenix’s Comprehensive Annual Financial Report published in June 2018, the city’s net pension liability is $4.56 billion.
And according to census data from July 2018, Phoenix has 544,022 households.
Dividing those two numbers puts the city’s pension debt at about $8,730 per family.
A spokeswoman for Responsible Budgets, Merissa Hamilton, told AZ Fact Check in an email that the $13,290 figure comes from “the $5.7B unfunded pension liability divided by the number of households in Phoenix.”
The group did not provide a source for the $5.7 billion figure. But even when using this number, the cost per family comes to about $10,730, almost $3,000 less than the amount Responsible Budgets cited.
Hamilton said because there were fewer households in Phoenix at the time Responsible Budgets began their campaign, the math in the past did work out to around $13,000.
She did not clarify when the group began working on the Prop 106 initiative.
As the money for pension funds comes through tax collection, it’s important to note that every family in the city of Phoenix is not obligated to pay a certain amount of pension debt.
Rather, taxpayers foot the bill through taxes they already pay to the city, mainly in the form of sales tax.
Also, dividing the city’s pension debt by the number of households in Phoenix makes the price tag Responsible Budgets provides significantly greater. If the debt was divided by the actual population, the individual burden would be a fourth of what the group claims, or about $3,000.
Phoenix spokesman Matthew Heil likens the city’s current pension payment plan to paying off a mortgage on a house.
“Just like a mortgage, the cost is not paid in full up front but is spread over many years to be manageable. State law allows the city to do this, and we have always paid 100% of the required contribution,” Heil said.
That doesn’t mean the debt isn’t creating escalating consequences, though. A state law enacted in 2018 requires the city to publish their plan for funding the pension deficit every year.
In a city council report from March outlining Phoenix’s pension funding objectives, the city acknowledges, “Increases in net pension liabilities and annual pension costs have placed significant budgetary constraints on the City’s ability to provide employee wage and non-pension benefit increases . ... While currently manageable, this pressure will continue into the foreseeable future.”
Heil notes the city already has taken steps to help pay off the money it owes to its retirees.
“The city has, through referendum and administrative action, already implemented pension reforms, which have improved the city’s ability to meet its obligations and will continue to look for further reforms,” Heil said.
Still, Phoenix’s pension debt is growing, and so are concerns about funding it long-term.
BOTTOM LINE: Regardless of what portion of Phoenix’s pension debt each family accounts for when the debt pool is divided among them, every family is not liable for a certain amount of the total. Rather, taxpayer dollars fund the city’s pension liability.
Also, the numbers Responsible Budgets uses to justify their claim are inaccurate.
SOURCES: “Responsible Budgets,” website, www.responsiblebudgets.com, accessed July 30, 2019; “Phoenix voters could fundamentally change the city in August. Why is no one campaigning?“The Arizona Republic, July 8, 2019; “Who’s behind Phoenix’s latest ballot measure, and what would it do?“The Arizona Republic, March 18, 2019; “Phoenix, Arizona, Proposition 106, Pension Debt Policies and City Budget Growth Limits Initiative (August 2019),” Ballotpedia, accessed July 30, 2019; “Comprehensive Annual Financial Report,” City of Phoenix, June 30, 2018; “QuickFacts: Phoenix city, Arizona,” The United States Census Bureau; “City Council Policy Session“City of Phoenix, March 19, 2019.