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Was it constitutional for Proposition 124 to replace PSPRS' permanent benefit increases with a capped 2% COLA?

In this blog I and multiple commenters have broached the subject of the suspect constitutionality of PSPRS' replacement of the old perma...

Thursday, November 26, 2015

What will PSPRS look like the next time we celebrate Thanksgiving?

As most of us are aware, 2016 will be a watershed year for PSPRS.  The panel of judges selected by the Arizona Supreme Court to adjudicate the Hall case (CV-15-0180-T/AP) will hear oral arguments on February 18, 2016 and will probably deliver a final decision sometime before the end of the current fiscal year.  If you would like to read updates on the case, though there should be no more coming until after oral arguments are heard, you can follow the Pension Litigation Tracker link or go to the Arizona Supreme Court case page directly then click on the active civil cases link and search that page for the word "Hall."

We also have that other branch of government involved too.  This AP story, Lawmakers work on public safety pension system overhaul plan, by Bob Christie appeared in the November 26, 2015 Arizona Daily Star.  It gives tantalizing clues to some of the changes to PSPRS that the Arizona Legislature will be considering in the next legislative session.  Among these are:
  • Changes to how permanent benefit increases (i.e. COLA's) are calculated
  • Income level caps for pension calculations to combat pension spiking
  • Having equal contribution rates for employees and employers
There is not a lot of detail in the article, but it appears that the Legislature is incorporating some ideas from both the League of Arizona Cities and Towns' Pension Task Force Report and the Professional Fire Fighters of Arizona's (PFFA) awful plan.  Mr. Christie attempted to get a comment from PFFA President Bryan Jeffries for his article, but he declined to comment.  Whatever comes out of the Legislature will have to be referred to the voters for final approval, and it seems likely that they would want to do this in November 2016 during a presidential election year when voter turnout will be the highest.

I hope everyone has a safe and enjoyable Thanksgiving this year.  Next Thanksgiving may find all of us in a very different pension system. 


  1. The tech crash of 2000-01, which Az PSPRS lost its ass and still hasn't recovered from today, was papered over. 2008 crash papered over as well. IMO we are headed for a 2001, 2008 crash all over again and 2016 looks to be a good bet. As long as people have no alternative but to "risk" their live savings in a fraud riddled, corrupt casino nothing is going to change. Any reform that does not involve reform to the financial system is moot. Az PSPRS's problems are a symptom of a far greater set of issues.
    BTW I do believe the COLA system does need reform. I know of several retired firefighters from my department who make far more now than they did when they worked through the COLA process. These were 20-25 year guys who retired in the late nineties. 2016 may be the year most of the major pension funds in the US are declared insolvent.

    1. Thank you for your comment. I know in a lot of studies they have shown that in the long run actively managed portfolios do no better than simple, diversified index strategies. Vanguard founder John Bogle has preached this for years and encourages investors to simply invest in low-cost index funds. PSPRS is continually comparing itself to "peer funds" without also showing how it would have done in comparison to a diversified index portfolio. This third benchmark would give us a truer picture of its performance and the value of the current strategy. Some individuals can succeed with an actively managed strategy, but how many Warren Buffett's and David Swenson's are really out there? Thank you again for reading and your comment.


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