With a fight looming this fall over how the city offers employee pensions, Tucsonans can expect to hear many facts and figures on both sides of the argument.
Last week, the group looking to overturn the current system got a jump-start on the process when it released a flier explaining to voters why it wants to switch from a guaranteed benefit plan to a 401(k)-style program for all nonpublic safety employees.
The Committee for Sustainable Retirement Benefits asserts that if nothing is done, the city faces financial ruin. It says its plan will preserve employee pensions while protecting taxpayers by forcing the city to pay off its approximately $340 million in unfunded pension liabilities and set up a pay-as-you-go pension for future hires.
City officials say the group has thrown out several distortions.
Below are some claims from the flier and responses from the city.
The Tucson Supplemental Retirement System is currently 63.5 percent funded because the city has not been making its required contributions.
Not true, said Doris Rentschler, city pension analyst and chair of the city's Pension Education Committee. The city has never missed a payment to the retirement system, Rentschler said. Under the Tucson charter, the city must fully fund the benefits paid out to retirees or their survivors each year, which is about $61 million. Every two weeks, the city must put away its and its employees' required contributions to ensure there's enough money to cover its annual obligations, she said.
The real reason for the ballooning unfunded liability is an underperforming stock market over the past decade. In 2000, the city had zero unfunded liability in its pension portfolio. Then the tech stock bubble burst in 2003, followed by the housing and financial collapse of 2008, and the city's investments never recovered.
In 2008 alone, the city's investments lost $180 million in value. The only way for the system to be fully funded over those years was for the city to cover those losses, which is unrealistic, Rentschler said.
"Was the city supposed to write a check for $180 million?" Rentschler asked.
Elected officials negotiated pension plans but did not adequately fund those promised benefits.
Elected officials do not negotiate the pension plan, Rentschler said. The City Council adopts changes to the plan from time to time. Changes stem from recommendations by the pension's board of trustees.
Since 2006, the board has increased contribution rates and reduced benefits for new employees and made other changes to decrease costs and make the plan more stable, Rentschler said.
Property taxes will go up and city services may be cut unless we solve this problem.
If the measure passes, this could happen almost immediately, Rentschler said. Closing a defined benefit plan would do nothing to eliminate the $340 million in unfunded liability, she said, but it would mean the city would have to pay it off much sooner, at least within the next 10 to 15 years.
City estimates show the first-year cost would add an additional $24 million to the city's expected $33 million pension fund contribution for next year. The city would also have to pay tens of millions more each year before it starts to experience savings from the changeover around 2028.
These increased costs would burden an already deficit-laden budget and likely force the city to consider cuts or higher taxes as a solution, Rentschler said.
Peter Zimmerman, a consultant for the Committee for Sustainable Retirement Benefits, said the group will look at the city's responses and, if they prove valid, would amend any statements.
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"Was the city supposed to write a check for $180 million?"
city pension analyst and head of the city's Pension Education Committee
Contact reporter Darren DaRonco at 573-4243 or email@example.com.