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Tucson may owe pension fund extra $16M next year
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Tucson may owe pension fund extra $16M next year

  • Updated

Tucson could pay up to $16 million more for its police and fire pensions next fiscal year, according to a newly released state pension board report.

The ballooning costs are mostly the result of a recent Arizona Supreme Court decision overturning a 2011 state law intended to keep pension costs down.

The decision means Tucson could pay about $62 million for its public-safety pensions next year.

Back in February, the court ordered the Public Safety Personnel Retirement System to reimburse retirees $40 million for past cost-of-living increases and to shift $335 million to a reserve fund to cover future cost-of-living increases.

After the ruling, the state pension board had to calculate how much of a dent the court order would put in each city’s retirement funds.

It released its calculations earlier this week.

For Tucson, it drops its police and fire pensions under 40 percent funded through the plan’s investments, according to PSPRS documents.

That means taxpayers are on the hook for $763 million in unfunded pension obligations owed to existing and future public safety retirees. The two pensions hovered around 50 percent funded last year.

As a result, Tucson will likely pay over 60 cents on every dollar of salary for police and fire personnel toward pensions.

So for a firefighter or police officer making $50,000 a year, the city would have to pay an additional $30,000 for his or her pension.

Just over a decade ago, when funding levels were high, the city contributed $5 million a year toward police and fire employee pensions.

But then the recession struck.

Since then, slumping stocks, hiring freezes and retiring employees combined to put a strain on the retirement system and bloated annual costs for the city.

Although Arizona cities face a significant jump in their pension costs next year, the state board is offering a three-year payment option to lessen the blow.

However, the state’s actuarial recommendation is that cities with pensions under 50 percent funded, such as Tucson, avoid the payment plan because it would further drop their already dismal funding numbers.

Chief Financial Officer Kelly Gottschalk said the City Council will ultimately decide on whether the city will elect to go with the three-year phase in option.

With the numbers just being released, she said city finance officials will now have to factor in upcoming police and fire retirements, new hires and other variables before a final number is determined for next year’s budget.

They will also have to determine where the extra money will come from in an already strained budget.

This latest pension news comes on the heels of the city’s non-public-safety employee pension board switching its investment projections in June and adding up to an extra $4 million to the city’s nonpublic employee pension.

Overall, the city could pay about $100 million for its three pension plans next fiscal year.

Contact reporter Darren DaRonco at 573-4243 or ddaronco@azstarnet.com


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