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Updated Feb 19, 2013 - 5:20 pm

Bill dumping judge’s pensions passes 1st hearing

PHOENIX — A plan championed by Arizona House Speaker Andy Tobin that would
eliminate pensions for new elected officials and judges and replace them with
401(k) style retirement plans passed its first Arizona House hearing Tuesday on
a 5-3 party-line vote as the lobbyist for judges agreed the current plan was
beyond saving.

The bill makes good on a promise Tobin and fellow Republican Rep. Phil Lovas
made to revamp the Elected Officials Retirement Plan in part because it only has
assets to cover about 58 percent of its liabilities and the state must make up
the difference. And there were slightly more retired members and their survivors
drawing benefits last year, 992, as there were active members.

Superior Court judges have said changing the retirement system could discourage
highly qualified lawyers from serving on the bench. But in a surprise, the
lobbyist for the Arizona Judges Association testified at the House insurance and
retirement committee Tuesday they agreed the plan should be shut down because it
just wasn’t savable.

But they continued to oppose the bill’s plan to have the state contribute 5
percent of a judge’s or elected officials’ pay into a 401(k)-style plan, calling
it too low. Pete Dunn also said there should be an option to join the regular
state retirement plan.

“We think that the retirement alternatives for people deciding to become
judges or deciding to run for county assessor or county recorder ought to be a
reasonably good retirement program,” Dunn said.

Because of the unfunded liabilities, with the plan having about $356 million in
assets and $610 million in liabilities, the state contribution has gone from
about 6 percent of salaries in 1999 to 39 percent today, Lovas said. And
lawsuits challenging a bill cutting cost of living raises for pensions have put
that effort on hold. If that sticks, Lovas said the state contributions are
projected to rise to 51 percent by 2027.

“So the system is not getting any better, and we think the prudent thing to do
is to shut it down,” Lovas said Tuesday. “And what that will do is ensure the
solvency of it for members who are currently there, create a fair system
similar to what the private sector offers for new members, and we’ll save money
in the long run.”

Tobin testified on behalf of the bill, saying it was time to address the
elected officials plan, and hinted others are in his sights too.

“Let’s be honest, whether we want to admit or not or agree to it we have a
crisis in our elected officials retirement and in many of these defined benefit
plans,” Tobin said. “We have some cities and counties around the country who
actually are going bankrupt over these issues.”

The bill sponsored by Lovas would not affect current elected officials or
judges. But those entering office after July 1 would go into the new plan.

The state’s share of contributions would be lowered and stretched out for 30
years to fund the current shortfall.

As to a different pension plan scaring off potential judges, Lovas doesn’t
think so.

“I think we’ll continue to get qualified people,” he said. “Certainly,
they’re paid very well, $145,000 a year, you have the status of being a judge,
you really don’t have any opposition when you run for re-election – we have
retention elections.”

As for pensions, incoming judges and elected officials have had careers inside
or outside government where they’ve been able to save for retirement, and
they’ll be able to continue doing that with the new defined contribution system
Lovas envisions.

About half those enrolled in the plan are elected officials. Besides judges,
including the Supreme Court, appeals court and superior courts, those eligible
for the plan include state legislators and elected officials at the state and
county level, plus some city elected officials.

The bill now goes to the House appropriations committee.


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