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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...

Monday, February 8, 2016

State public safety unions and PSPRS pension reform: Sending Monopoly® players to a poker game and a chess match

We have already discussed how the sellout of the next generation of firefighters and law enforcement will be accomplished.  The more important question is why.  Why would the leaders of the state’s public safety unions be so willing, even eager it seems, to throw the next generation under the bus?  Shouldn’t there have been fraternal and paternal instincts to protect the next generation, to leave them more than we had, rather than burden them with all the financial sacrifice?  I am perplexed as to why the ostensible guardians of the firefighter and law enforcement legacies would acquiesce to such a betrayal.

Is it simply senior members just looking out for themselves?  Maybe.  The deal public safety union leaders negotiated ensures that Tier 1 and Tier 2a members sacrifice nothing while placing all the costs of the deal on Tier 2b and Tier 3 members, in particular.  Yet if you listen to the rhetoric from the union leaders, particularly Bryan Jeffries, president of the Professional Fire Fighters of Arizona (PFFA), you would think that everything was great and everyone made out the same.   Of course, he had the same attitude last year when he was trying to sell everyone on an even worse plan crafted by the PFFA.

If we take union leaders at their word that they really believe this PSPRS pension “reform” is good and fair for all tiers, what could explain their self-delusion?  Let’s start by looking at the union mentality.  If you have never been to a union meeting, it is an interesting experience to see how they portray the world.  When it comes to wages and benefits, especially those already in place, there is always some bogeyman lurking out there trying to take them away.  If we aren’t vigilant, some politician, some political party, or some special interest group or think tank will take away everything we’ve earned.  Here in Arizona, their favorite bogeymen is the Goldwater Institute.

I suppose this does some good as a method to rally the troops and keep them united and paying dues.  For an organization like the PFFA, which is not really a union but a lobbying organization funded by union locals to advocate for them on the state level, it helps them to characterize themselves as necessary warriors against the hostile forces allied against the state’s firefighters.  This may be a noble image, but it is a fiction as the PFFA and all the other state-level unions are just negotiators and deal-makers, who define success by acquisition and maintenance of benefits.  These are the benchmarks by which they assess themselves, not the long-term consequences of their “accomplishments,” much less the ethics of them.
The state-level public safety union leaders are Monopoly® players.  Monopoly® starts as a game of acquisition – properties, railroads, utilities, but as the game progresses, the maintenance of assets becomes just as important.  The inability to maintain assets is the surest way to accelerate one’s eventual departure from the game.  Monopoly® is the game Mr. Jeffries and the other state union leaders have played for years, achieving their version of success, trying to acquire as much as possible; sustainability be damned.  It is the game they are playing now, and as such, they can call the PSPRS reform deal they negotiated a “victory,” since they are maintaining what they have; future generations be damned.  Unfortunately, it appears that this is the only game they know how to play.

On the other side, the Arizona legislature had the foresight to involve in the negotiations Reason Foundation, an organization that knows that Monopoly® is not the real games being played here.  Reason Foundation knew the real games being played were poker and chess.  Reason Foundation did not have to be Phil Helmuth to beat the state-level unions at poker.  Anyone could have detected their tell, one so obvious that the union leaders may as well have flipped their hole cards over for Reason Foundation to see.  The tell was the ridiculous PSPRS reform plan that the PFFA was trying to peddle last year.  This horrible plan of intergenerational theft showed that the PFFA and at least some of the law enforcement unions were concerned only about senior members in Tiers 1 and 2a.  This told Reason Foundation that the state-level unions were willing to sacrifice Tier 2b and 3 members' benefits in order to protect the benefits of senior members.   Senior members just had to accept a change the permanent benefit increase (PBI) formula, which is not really a sacrifice since PSPRS has neither the ability nor inclination to generate excess returns that could trigger future PBI's.  Reason Foundation may have allowed the state-level unions to win a hand or two, but they cleaned them out in the end.

Reason Foundation bested the state-level unions in chess as well.  It was funny to see Mr. Jeffries and Will Buvidas, the law enforcement union representative, talk about how they were pleasantly surprised with Reason Foundation and how easy they were to work with.  This brings to mind the adage that if you look around the poker table and can’t tell who the sucker is, it’s you.  I suppose if you were not even aware that you gave up your whole negotiating position before the poker game even started, you probably would think that Reason Foundation was easy to work with.

When skilled players play chess, they do not think moves ahead like a supercomputer does.  This is simply beyond the capacity of the human brain.  Good chess players must study past games in order to develop the pattern recognition necessary to know where the best move is based on the current arrangement of the board.  This is similar to poker where the dealt cards are not looked at in isolation during each hand with bets made accordingly.  Good poker players know the odds a particular hand has of winning based on years of studying and playing against other good players.  It is only in narrow margins where true “play” occurs and the game is ultimately won or lost.  Likewise, chess has its end game where the match reaches the point where pattern recognition becomes less trustworthy and every individual decision become crucially important.  Concentration, skill, and avoiding errors are essential during the end game.

If we look at the state-level public safety unions, they showed themselves to be as incompetent at chess as they are at poker.  I do not know Reason Foundation’s exact position on PSPRS reform; they give us no tells.  However, organizationally, I think it is safe to say that they are not fans of public employer defined benefit (DB) plans and would prefer public employees to be in defined contribution (DC) plans that do not burden government and taxpayers with open-ended costs in perpetuity.  However, once they won the poker game, they focused on their end game.  They knew that the PFFA and the law enforcement unions would not go for a full replacement of the DB plan with a DC plan.  This would have been a fatal opening.  They, instead, like good chess players, focused on their end game.

This end game was directed at Tier 3 members.  With the inclusion of the 50/50 split of normal costs and a DC-only pension option, in which employees and employers would each contribute 9% of pay, they have put in place a mechanism to permanently end the PSPRS DB plan if it ever becomes financially unstable again.  In the future, newly hired Tier 3 PSPRS members will not want to pay the exorbitant employee contribution rate into the DB plan if PSPRS spins out of control like it has now.  They will simply join the DC-only plan, knowing that their max contribution will only be 9% with equal matching from their employer.  As ever increasing numbers of Tier 3 members opt into the DC-only plan, the DB plan will go into a death spiral.  If future PSPRS members choose to screw up their pension, despite the safeguards put in place, the poison pill put in place by Reason Foundation will ensure that the DB plan is permanently put to rest.

What was the end game of PFFA and the law enforcement unions?  They didn’t have one.  I don’t know if they were fooled by Reason Foundation or if they just didn’t care.  Either way this poison pill will be there, waiting to be used when necessary.
It is probably not a good idea to send Nicolo Falcone to negotiate against Gary Kasparov and Phil Ivey.  Who’s Nicolo Falcone, you ask?  He is the world Monopoly® champion.  Yeah, I had to look him up.   While I am sure it takes a certain skill to win that championship (as I am sure it does to win the rock-paper-scissors championship), the game is still more about timing and luck.  The other games involve skill, social intelligence, and a long-term outlook.  The PFFA and the law enforcement unions won the Monopoly® game because Reason Foundation let them and knew that that was the only game the unions believed they were playing.  Reason Foundation won the poker and chess games, the ones that really mattered, and now the next generation of firefighters and law enforcement will have to pay the price.

Side note:
While it appears that the PSPRS pension reform bill (SB 1428) has sailed through theArizona Senate, it still does not appear to be a certainty to appear on the May 2016 ballot.  There seems to be some issues among Arizona House members and the Arizona Police Association.  SB 1428’s proponents seem to be dead set on rushing this through—it must be signed by the Governor by February 15, 2016 in order to appear on the May ballot.  Otherwise, it will have to wait until the general election in November 2016.  We have to ask ourselves why this has to rushed through if implementation will not begin for over a year. Stay tuned.


  1. As an accidentally disabled (injured in the line of duty) retired Mesa FireFighter I agree. They not only burdened the next generation they are also trying to assault the current retirees contractual benefits by disregarding not only the Arizona State Constitution but also the United States Constitution Article 1, Section 10. Why the mad rush for special election? Is it they do not want people to actually read it and understand it?
    It is also very interesting that retirees as a whole have not been represented throughout this entire process. The only retirees to speak on the matter were hand selected to spew the establishments own words.
    Not only will this cost Public Safety employees (past, present, and future) it will cost every tax payer millions of dollars in lawsuits that the State will ultimately lose.

    1. Thank you for your comment. Unfortunately, based on my reading of the Fields decision, hat the Supreme Court held that the pension protection clause of the Arizona Constitution has precedence over the contracts clause since it deals specifically with pensions. This means that if they change the PBI's via the pension clause it will likely negate any argument that it unconstitutionally violates a contract.

      It is a shame that retirees had no representation on the PSPRS Board of Trustees, like retirees have on the ASRS Board. It would have made it more difficult for PSPRS to defend its lousy earnings as some kind of deliberate strategy to help PSPRS save money. PSPRS' inability to earn 9% has left retirees with no choice but to accept the new PBI change if they ever want any future COLA's.

      The saddest spectacle is when I see this plan's union proponents go to the public and media and emphasize how retirees have been getting 4% for 20 years as if this was some unnoticed crime committed by retirees, rather than a benefit that past union leaders proudly obtained for members. Current union leaders are unwilling to give up anything themselves, but they hypocritically demonize retirees as if they have been receiving some unearned benefit for decades. Thank you again for your comment.

  2. "Why the mad rush for special election? Is it they do not want people to actually read it and understand it?"

    The legislation needs to pass mid February to get it on the mid May ballot. If that's not enough time to "read it and understand it" there will never be enough time.

  3. I retired in 2011. Your figures show I should have gotten COLAs totaling $345.52. My COLA total has been $301.52, which is a $44.00 discrepancy from your figures. What gives?

    If the future COLA % is applied directly to each individual account instead of being the average, isn't that an example of the "rich"(Chiefs) getting richer and the "poor"(firefighters) getting poorer?

    1. Thank you for your comment. The COLA amounts were obtained from the PSPRS annual reports. I went to the Arizona Revised Statutes, these are some of the additional conditions that affect your eligibility for a COLA right after you retire:

      1. The retired member or the survivor of a retired member was receiving benefits on or before July 31 of the two previous years.

      2. The retired member or survivor of a retired member was fifty five years of age or older on July 1 of the current year and was receiving benefits on or before July 31 of the previous year.

      Some of these conditions may apply to you. As to your second point, I do not necessarily agree with the rich getting richer, but it is unfair, especially for someone like you who recently retired. In your case, you never really benefited from the old system in which retirees with lower benefits could see some extra gains over the years as the average retirement benefit increased. Now they are going to change the system, and you will be stuck with a new COLA that will give you the lesser of the CPI or 2% on only your benefit. You retired with the expectation that you could expect to pick some financial ground over the years as the average benefit increased, but now that has been taken away. Perhaps you would have done things differently if you had known this.

      Of course, the people who are negotiating this know full well that this will be the new system and will adjust their working careers accordingly to make sure they get the most from it before they retire, while they timidly agree to cap pensionable wages on future PSPRS members. This is just another of the many injustices from this pension “reform.” Thank you again for your comment.


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