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

Thursday, June 12, 2014

How to stop the PSPRS pension monster from eating your paycheck: this is a good first step

It appears that the practice of using sick and vacation leave sellback to spike pensions has been all but ended.  These two stories from Phoenix and Tucson, Phoenix ends pension spiking for police officers, firefighters by Dustin Gardiner and Judge won't force city to resume sick-time selling policy by Darren DaRonco, from the Arizona Republic and the Arizona Daily Star, respectively, show that the governments of the state's two largest cities and the Goldwater Institute are on the same page: you can not legally count sick or vacation leave as pensionable compensation.

It remains to be seen how the courts will rule.  However, the judge in Tucson ruled against the police union who wanted a delay in implementing the city's new policy until the actual court hearing, and the Goldwater Institute is considering dropping its lawsuit in Phoenix.  The amount of money that can be saved by employers is just too great for them not to do everything they can to eliminate sick and vacation from pensionable income, especially when it is clearly illegal.  This makes it seem like this issue is now settled, except for the issue of employee and employer contributions on past sick leave sellback, which I previously addressed here.

The Arizona Republic article says that eliminating sick and vacation leave sellback from pensionable income will save Phoenix taxpayers "an estimated $233 million over next 25 years, according to a city report," and $2.3 million in the next fiscal year alone.  Those opposing this change in Phoenix (and, of course, considering a lawsuit) can only point to how some employees have saved their sick and vacation leave for years to enhance their retirement.  This is another iteration of the "broken promise" defense.  However, the outrage over the elimination of sick and vacation leave from pensionable income is lost on me.

We are now in a situation where the pension tail is wagging the compensation dog.  Even if we care not a whit about taxpayers or the funding of other city services, we have to recognize that pension costs are now driving down the available money that can be paid to current public safety employees.  Remember, we now have a pension that has two tiers of employees based on when they were hired, although I might substitute the term "caste" for "tier" when we consider the difference in how each group is treated.  These Tier Two employees, hired after 2011, are required to pay more, work longer, and have lost many other pension benefits, including enhanced refunds and the DROP.

Keeping sick and vacation leave pensionable benefits only one group of workers: those close to retiring or entering the DROP; yet it increases costs to everyone else since it negatively affects PSPRS' financial condition.  These costs will continue long after the beneficiaries retire and will affect the income of those still working for years to come.  These costs may be visible, through the increased pension contributions already in place, or invisible, through pay raises never implemented in the future, but either way they are going to drop the career earnings of those still working.  A policy that beggars junior workers still left behind after those more senior retire is hardly worth fighting to keep.  Shouldn't we care more about the pay of everyone than the retirement income of a few?

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