With Tucson police and fire pension costs expected to jump 20 percent next year, to $42 million, the City Council voted Tuesday to create a task force to search for ways to scale back on the costs.
Although police and fire pensions are controlled by the state, Mayor Jonathan Rothschild believes the city isn't helpless. He said if everyone comes together and looks at the dire numbers confronting the city, he believes a consensus on what can be cut or modified to improve the system is within reach.
A decade ago, the city paid just under $5 million for public safety pensions. But that was before the Great Recession. Since then, slumping stocks, hiring freezes and retiring employees all combined to place a strain on the retirement system.
Speakers at a council discussion blamed the rapid increase on Tucson's having one of the older pension systems in the state, which means there are more retired employees to account for - the system now has less than one active public- safety officer for every retired or noncontributing employee.
"That's the story of our retirement system. ... The ratio between actives to retirees is really what is driving this," said Finance Director Kelly Gottschalk.
Also, the city has seen an inordinate number of disability-related retirements at the Police Department. Statewide disability-related public-safety retirements average about 14 percent. TPD's disability rate is over 22 percent. Tucson Fire Department's rate is about 5 percent.
The exact reasons why TPD's rates are so high are unknown, but Gottschalk said it appears city's police disability board "was pretty lenient on classifying disabilities" from 1990 through 2005.
As a result, the city now has around a $540 million in unfunded pension liabilities for police and fire employees and pays one of the highest rates in the state, 44 cents for every dollar of those employees' wages. Projections show that could rise to 66 cents or higher by 2027 if nothing changes.
Rothschild said the city must act because the rising pension cost is consuming so much of the budget it makes it harder to pay for other needs.
"We can't get the guys on the streets that we want to. We can't get the raises we want to because of this issue," Rothschild said. "It's not going to be sustainable with what we have to do."
Employees need to know this is "not to the detriment of our labor force, but to the benefit of our labor force," Rothschild said.
But what the city can actually do to lessen the burden is unclear.
For now, Tucson's options are limited, Gottschalk said. But almost every city will start experiencing the pension crunch soon, she said, and once that happens, Gottschalk believes there will be a larger outcry for the state to do something.
They're all going to catch up with us," she said. "We are kind of the leader in this. As other cities start to catch up to us, there will be a lot more pressure on the state Legislature to do something."
In addition to police and fire pensions, the city pays about $27 million a year in pensions for its employees who are not involved in public safety. The city pays 28 cents in pensions for every dollar in wages for its fund. That fund stands at $940 million and has an unfunded liability of about 37 percent.
Contact reporter Darren DaRonco at 573-4243 or firstname.lastname@example.org