Michael Townsend, ACMA Board of Directors
Unfunded pensions are a critical financial "legacy issue" facing citizens across the country as
well as our future generations - and new GASB financial disclosure requirements will be bringing
sharp focus to the unfunded liabilities of all organizations.
Closer to home in Arizona, there is widespread agreement that the state's current Public Safety
Personnel Retirement System (PSPRS) is "unsustainable." Reforming PSPRS is one of the most
important financial issues facing the taxpayers in the state of Arizona. (To illustrate the magnitude of this issue, the system's
total unfunded liability on June 30, 2014 was $6.2 billion.) Each PSPRS member jurisdiction is managing its pension plan within
the larger system and has a fiduciary responsibility to ensure a plan has sufficient financial resources to provide the benefits
earned by the retirees.
An important point to keep in mind is that these benefits have been earned, and will be paid in the future - this is a financial
reality that must be managed. At the same time, a sustainable plan to provide retirement benefits for future public
safety employees is needed so the debt (in the form of unfunded liabilities) does not continue to grow as a burden to future
In June 2014, the Executive Committee of the League of Arizona Cities and Towns created a task force to respond to this issue.
The task force was charged with performing a comprehensive review of PSPRS, identifying areas of improvement and developing
reform recommendations. The task force reflects the diversity of PSPRS members, and is comprised of 15 representatives from the
League of Arizona Cities and Towns, Arizona City/County Management Association (ACMA) and the Government Finance Officers
Association of Arizona (GFOAz). This group of professionals has contributed many hours to this project and maintained focus and
dedication toward creating a well-thought-out product.
As an outcome, the task force identified three essential elements of a successful pension program and created a "yardstick"
against which reform proposals can be evaluated. The yardstick includes three criteria that examine whether a proposal is:
adequate and affordable, financially solvent, and transparent and accountable. This criteria was presented to the Executive
Committee in May 2015. At that time, the Executive Committee directed the task force to vet the approach with stakeholders
including staff from the governor's office, the treasurer's office, the state legislature, the League's Resolutions Committee,
labor associations, member entities, stakeholders, taxpayers, and subject matter experts.
This extensive process has been invaluable - not only in the education of stakeholders, but also because it provided valuable
feedback to the task force. For example, the yardstick recommends creating the "third leg" of the retirement stool for those
members not in the Social Security system by creating a "social security-like" defined contribution program. This
recommendation was the direct result of feedback received from the labor associations.
The yardstick can play an important role in reform discussions. It is designed to be a tool the Executive Committee can use to
evaluate pension reform proposals and make decisions that are in the best long-term interests of Arizona.
Members of the Pension Task Force:
- Scott Barber, HR Director, Town of Florence
- Greg Caton, Town Manager, Town of Oro Valley
- Karen Daines, Assistant City Manager, City of Sedona
- Barbara Fleming, HR Director, City of Sierra Vista
- Barbara Goodrich, Deputy City Manager, City of Flagstaff
- Michael Kennington, CFO, City of Mesa
- Alan Maguire, President and Principal Economist, The Maguire Company
- Scott McCarty, Town of Queen Creek (Chairman)
- James Menlove, Finance Director, Navajo County
- Robert Nilles, Deputy City Manager Administration/Finance Director, City of El Mirage
- Kathy Reyes, Benefits Administrator, City of Avondale
- Marc Skocypec, Assistant Town Manager, Town of Gilbert
- Mike Townsend, Deputy County Manager, Coconino County (Vice-Chairman)
- Marge Zylla, Government Relations, City of Tempe