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Sunday, December 30, 2012

The 2013 PSPRS plan: More Taxes

The following paragraph from PSPRS' 2012 Consolidated Annual Financial Report (CAFR) is included in the introductory letter by the Board of Trustees:
In the short term, and while awaiting final court decisions in the lawsuits challenging the changes made by the pension reform bill to the Plan's COLA and to member contribution rates, the Board of Trustees has directed the System's staff to urge the PSPRS constituent organizations and the employer groups to come forward with legislative proposals to add additional sources of revenue to supplement the revenue derived from contributions and investment return.  This seems to be the only means available in the short term to improve the Plan's funding status and diminish the upward trend of employer contribution rates.
In both its content and its presentation this passage verges on satire.  Filled with bureaucratic euphemisms, it attempts to disguise the Board's impotence and lack of ideas with a call to "constituent organizations and the employers groups to come forward with legislative proposals to add additional sources of revenue to supplement the revenue derived from contributions and investment return."

Translated into plain English, this means that the Board has no idea how to get PSPRS out of its financial crisis so they want retirees, employees (i.e. public safety unions), and local governments to pressure lawmakers to find new and creative ways to extract more tax money from Arizonans because PSPRS can not fund itself the way a defined benefit pension is supposed to.  This all comes from the group that is tasked with ensuring PSPRS is managed properly (Trustees were called Fund Managers up until 2009).

Of course, the problems with PSPRS are not fault of the current Trustees. All the current Trustees joined the Board after June 30, 2008, when most of the damage to PSPRS was already baked into the cake, and they are now presiding over a mess that was years in the making. However, this underwhelming statement of action can do nothing but disappoint PSPRS members and infuriate Arizona taxpayers.

Where the Board expects any "additional sources of revenue" will come from is a mystery.  Arizona taxpayers already pay a hidden tax in the form of fire insurance premium taxes that brought $12.2 million into PSPRS in FY 2012.  In November Arizonans  passed an initiative that limited property tax increases and refused to make permanent a one cent sales tax increase, so it is unlikely that there is a welcoming environment for anymore taxes, especially for a pension system that continues to lose money on its investments and takes more each year from employers and employees.  Furthermore, PSPRS' financial plight is unlikely to get much sympathy when taxpayers see PSPRS members so selfish that they are willing to drive PSPRS further into deficit so that they can continue to get annual raises.

2013 is not starting off very well for PSPRS.

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