Phoenix Voters Nix Plan to Cap Spending, Divert Savings Toward Pensions

Voters in Phoenix, Arizona last week rejected Proposition 106, a ballot measure that would have imposed strict limits on city spending and earmarked revenue over the budget limit to paying down underfunded pension plans that cover retired city employees. According to the City of Phoenix, only 33.2% of voters supported the plan, while 66.8% voted against it.

The initiative would have amended the city charter to add the following provisions:

  • Pension and retirement healthcare liabilities and funding levels would have been assessed annually based on generally accepted accounting principles (GAAP) and the 10-year average return on investment.
  • Annual budget growth would have been limited to inflation and population growth.
  • Revenue in excess of the budget limits based on inflation and population growth would have been used to fund pension liabilities.
    • There would have been exceptions for police, fire, and first responder budget requests.
  • Priority would have been given to paying down debt for police and firefighter pensions.
  • City officials taking office after the enactment of the initiative would have been required to reimburse the city for any pension benefit employer contributions from the city.

According to Route Fifty:

Opponents of the pension measure argued it would hurt spending on other priorities and tie the hands of officials when it came to budgeting. They also said the city is already on track to pay down a roughly $4.5 billion pension funding shortfall over the next 25 years.

That $4.5 billion “net pension liability” figure is the amount by which benefit payments in future years for city retirees are expected to exceed pension fund assets. As it stands, the city’s retirement system is not facing an immediate risk of not being able to meet its obligations.

Read Route Fifty‘s coverage for more information.