MAY 27, 2015

Goldwater Institute appeals decision in City of Phoenix pension spiking case

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PHOENIX – The Goldwater Institute has appealed a March decision by a Maricopa County Judge allowing the City of Phoenix to let retiring employees cash in benefits such as sick leave, unused vacation time, and uniform allowances in order to artificially inflate their salary for pension calculations. This case comes on the heels of reports that surging pension costs in Phoenix are creating significant budget deficits, requiring City leaders to consider cutting services or raising taxes.  

State law explicitly prohibits this practice—called “pension spiking”— among public safety employees but agreements between the City and labor unions including the practice had been approved for over 25 years.

In 2013, the Goldwater Institute challenged pension spiking, which costs taxpayers tens of millions of dollars each year. In response to that lawsuit, the City of Phoenix ended pension spiking on July 1, 2014.

After the City ended the practice, government labor unions sued the City, claiming that eliminating the pension payments was unlawful. The unions asked a judge to restore the previous pension payments, even though those payments violate the plain language of state law.

In March, Maricopa County Superior Court Judge Robert Oberbillig ruled that pension spiking is a legal way to increase base salary, allowing the case between Phoenix and the unions to continue. Today, the Goldwater Institute appealed that decision.

“Without an appeal, this decision would allow clearly illegal pension payments to be restored,” said Jon Riches, the attorney at the Goldwater Institute whose original lawsuit ended pension spiking. “Taxpayers obviously can’t allow that to happen. If cities can violate the plain language of the law, then there’s no point in having laws. Taxpayers would have no protection against government abuse at all.”

Pension spiking has contributed to the skyrocketing costs of Phoenix’s public-safety personnel retirement costs, which have increased from $7.2 million in 2003 to nearly $130 million in 2014; a more than a 1700 percent increase in 10 years.

“No one would argue that public workers shouldn’t have access to the pensions they are guaranteed, but to game the system in a way that costs taxpayers billions just isn’t right,” said Riches. The Institute’s earlier successful suit against Phoenix also ended pension spiking in Tucson. The Institute hopes to eliminate pension spiking nationwide. 

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