Governor Ducey,
The Facts:
- Many “temporary” state and municipal taxes are not temporary and continue to exist only to pay past retirement promises.
- California Gov. Jerry Brown sold a $6 billion tax increase to voters in 2012 by promising that nearly half of the money would go to bolster public schools. Critics argued that much of the new revenue would wind up in California’s severely underfunded teacher pension system. They were right.
- California taxpayer advocate Joel Fox recently observed that no matter what local politicians tell voters, when you see tax increases, “think pensions.”
- Many taxpayers felt little impact from the rising debt—until now.
- Decades of rising retirement benefits for workers—some of which politicians awarded to employees without setting aside adequate funding—and the 2008 financial meltdown have left American cities and states with somewhere between $1.5 trillion and $4 trillion in retirement debt.
- Governments have increased pension contributions to about $100 billion in 2014 from $63 billion in 2007.
- A report last June by the Pennsylvania Association of School Administrators found that nearly every school district in that state anticipated higher pension costs for the new fiscal year, with three-quarters calculating their pension bills would rise by 25% or more. Subsequently, 164 school districts received state permission to raise property taxes above the 2.1% state tax cap. Every one of the districts cited rising pension costs.
- In West Virginia, where local governments also face big pension debts, the legislature recently expanded the state’s home rule law—which governs how municipalities can raise revenues—to allow cities to impose their own sales taxes. The state’s biggest city, Charleston, with $287 million in unfunded pension liabilities, has already instituted a $6 million-a-year local sales tax devoted solely to pensions, on top of the $10 million the city already contributes annually to its retirement system.
- In April two-dozen Illinois mayors gathered to urge the state to reform police and fire pensions, which are on average 55% funded (sadly, 55% funding is better than AZ PSPRS’ approximately 49% funded level).
- Taxpayers in Chicago saw the first of what promises to be a blizzard of new taxes. The city’s public-safety retirement plans are only about 35% funded, though pension costs already consume nearly half of Chicago’s property-tax collections.
- Chicago residents also face an enormous state retirement bill. The Civic Committee of the Commercial Club of Chicago recently estimated that if the Illinois Supreme Court sustains a lower-court decision overturning 2013 pension reforms, Illinois taxpayers will pay $145 billion in higher state taxes over the next three decades.
- Burdened by so much debt, taxpayers in some places are unlikely to see relief soon. When California passed its 2012 tax increases, Gov. Brown and legislators promised voters the new rates would expire in 2018. But school pension costs will keep increasing through 2021 and then taxes remain at that elevated level for another 25 years to pay off $74 billion in unfunded teacher liabilities.
Governor Ducey – Don’t let the Arizona Public Safety Personnel Retirement System become another poster-child for unfunded pension liabilities!
(Sources: Wall Street Journal and The Manhattan Institute)
DuceySaveOurPsprsPensions 