Phoenix councilman: Some city employees retire with enormous cash payouts

PHOENIX — A Phoenix city councilman who has been calling for sweeping reform to the city’s retirement benefits program, claimed some city employees have retired with nearly half a million dollars in cash on top of annual pensions.

Sal DiCiccio, who represents District 6, released a list of the top 50 highest paid civilian retirees based on their annual benefits and said those people were costing the city hundreds of millions of dollars.

“If you look at all these numbers together, the average walk-away pay — just cashout payment at retirement — was $193,000 for 50 people in the city of Phoenix,” DiCiccio said.

“But the more staggering number is that 50 people are costing taxpayers $183 million.”

Topping the list are Phoenix’s two previous city managers.

“City managers are walking away with about $600,000 in cash at retirement, and then starting a pension of $236,000 to $246,000 a year, for life,” DiCiccio said.
One city librarian, 58, retired in 2011 with a pension of just over $102,000 a year, and a walk-away pay of more than $211,000.

With Phoenix’s budget deficit about $38 million, DiCiccio said the city risks severe cuts trying to keep the bloated pensions afloat.

“If you look at Detroit, Michigan, they had an unfunded pension debt of $3.6 billion, Phoenix has an unfunded pension debt of $2.5 billion,” he said. “There is no plan in place in order to pay for these pensions, so as the costs continue to go up people are going to see less services, less police on the street, less firefighters on the street, less after-school programs (and) less senior services.”

DiCiccio attributed the inflated retirement benefits to two factors.

“Here’s what the public doesn’t know, they don’t know that city of Phoenix employees, every single one of them not just the top 50, have two retirements,” he said.
“They have a 401(k), which they call deferred compensation, and they have their pension benefits.”

On top of the dual retirements, DiCiccio said employees can also rollover their vacation and sick leave year after year, then cash it out when they retire. “Then they cash it in like casino chips at retirement (and) they walk away with hundreds of thousands of dollars in their pockets,” he said.

The other issue is pension spiking, which DiCiccio said is alive and well, despite comments by city leaders that the problem has been fixed. DiCiccio maintains pension spiking hasn’t changed, it’s simply been capped.

“Everybody spikes at the city of Phoenix, everyone spikes,” he said. “They cash in their vacation, sick leave and their deferred compensation … they add that to boost their salaries. When they boost their salaries then the pension is based on the boosted amount of money they’ve enhanced in the final years.”

For DiCiccio, it’s a matter of conflict of interest. To fix the problem would require lawmakers to essentially limit their own benefits he said.

“The citizens are going to have to take this matter into their own hands because the Mayor and council won’t do it,” he said. “They’re part of the conflict of interest, the staff is part of the conflict of interest … when staff does these labor negotiations, they’re negotiating their own income.”

DiCiccio said he supported an initiative that aims to end pension spiking by terminating vacation and sick leave rollovers, and making changes to the benefits that future and current city employees can receive.

Scot Mussi, chairman of Citizens for Phoenix Pension Reform, which is leading the initiative, said not reforming the pension system could cripple the city of Phoenix.

“The system is unsustainable,” Mussi said. “It’s a looming crisis that coming across the country and it’s here in Phoenix.”

He said the initiative, called the Phoenix Pension Reform Act , was turned into the city in March with about 54,000 signatures on it and will appear on the Nov. 4 ballot, has two main parts, Mussi said.
First, it would first grandfather out pensions for civilian city employees.

“Most private employees don’t get multiple retirement plans funded,” he said. “City employees should not be enjoying two tax-payer funded retirement plans.”

The initiative would require current employees to make a choice between receiving a 401(k)-style deferred payment at retirement or receiving a pension, Mussi said they would no longer be allow to collect both. It would also phase out pensions for new employees, who would only be offered a deferred payment system going forward.
Secondly, Mussi said the initiative would end pension spiking by no longer allowing employees to rollover unused vacation and sick pay to inflate their pensionable pay.

“Accrual of benefits that people get, (such as) vacation and sick time, can no longer be used as part of their pension calculations,” he said. “So that they can’t take vacation and sick time and say ‘we’re going to use that to boost our pensionable pay.'”

DiCiccio’s list of highest paid retirees excluded police officers and firefighters, though if they were added, three would make it in the top 10 highest paid retirees. He said the citizen-led initiative would not affect the retirement programs for police and firefighters because their retirements are handled by the state retirement system, not the city’s and that is why they were left off the list.

DiCiccio said he supported a pension program for police and firefighters, but does not support them receiving dual retirements, either.

Requests for comments by Mayor Greg Stanton’s office and city council members were not immediately available.

KTAR’s Cooper Rummell contributed to this report.