Arizona Enacts Groundbreaking Public Safety Pension Reform

Commentary

Arizona Enacts Groundbreaking Public Safety Pension Reform

This afternoon, Arizona Gov. Doug Ducey signed into law comprehensive pension reform legislation that will put Arizona’s beleaguered public safety pension system on a path to financial solvency. The Arizona Public Safety Personnel Retirement System (PSPRS)—which covers all law enforcement personnel and firefighters statewide—has accumulated $6.6 billion in unfunded liabilities over the past dozen years and stands at only 48% funded today.

Arguably more notable than the reform itself is the process used to achieve stakeholder consensus on the reform package, as it avoided the adversarial dynamic of pension reform policy debates that typically pit employers/taxpayers against employees and labor interests. In the case of PSPRS, the legislation—a package of three bills sponsored by State Sen. Debbie Lesko—was the result of a year-long, collaborative stakeholder process launched by Lesko and Senate President Andy Biggs that garnered extensive support from public safety associations and many other stakeholders in the government and business community.

The legislation had strong bipartisan support, passing the Senate unanimously and the House of Representatives overwhelmingly, with a 49-10 vote.

Reason Foundation was a key player from the beginning of the process, with its Pension Integrity Project team providing education, policy options, and actuarial analysis for all stakeholders. We also facilitated the development of consensus among stakeholders on the conceptual design and framework of the reform. Further, more than once we resorted to shuttle diplomacy to keep stakeholder parties at the table when negotiations became difficult or threatened to break down.

Arizona’s public safety associations—led by the Professional Fire Fighters of Arizona, the state lodge of the Fraternal Order of Police, and the Phoenix Law Enforcement Association—also deserve major credit for recognizing the need for reform early on and proactively bringing reform ideas to the table that ultimately led to the launch of the stakeholder collaboration process.

Conservative legislators, public safety unions, and a libertarian think tank may seem like strange bedfellows when it comes to forging an agreement on a precedent-setting pension reform affecting law enforcement and fire personnel, but the ultimate success of the effort suggests that a collaborative process may be just the recipe needed to achieve reform on such a complex and intractable issue. Arizona Republic editorial board member and columnist Robert Robb recently described this reform effort as “a paradigm-buster,” adding that, “public employee unions and libertarian wonks blazed new ground on a difficult and emotional topic that is producing paralysis around the country.”

For more details of the reform and links to additional resources, see our full writeup here.

Leonard Gilroy is vice president of government reform at Reason Foundation, a nonprofit think tank advancing free minds and free markets. He also serves as senior managing director of the Pension Integrity Project at Reason Foundation, which assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.

Anthony Randazzo

Anthony Randazzo is a senior fellow at Reason Foundation, a nonprofit think tank advancing free minds and free markets.

Pete Constant

Pete Constant is a senior fellow at Reason Foundation, where he works on the Pension Reform Project.