It has been known for over a decade now – the State’s pension system is a sinking ship.  Despite efforts in recent years by the Legislature to bail as much water out of the vessel as possible; it would seem the system has been doomed by the Bermuda Triangle of forces: unions and their politically complicit cities, the system’s managing investment board, and activist Courts.

PSPRS is currently a $9.3 billion fund, with roughly 50 percent unfunded liabilities.  Recently, 20 Arizona Mayors penned a letter to Governor Ducey calling for him to “do something” about PSPRS (Public Safety Pension Retirement Fund), and its deepening insolvency that threatens to completely tank cities such as Bisbee, Prescott and Flagstaff and unleash a tidal wave that would topple the system as a whole.

Among the suggestions being offered by local leaders is to fire the PSPRS board and move its financial and investment management to the State Treasurer’s office.  It is clear the panic has finally settled in.  Consider, these same local leaders have been at best complacent to union-efforts to continually ratchet up benefits, and at worst complicit in efforts to stop the State from curbing benefits, cost of living adjustments, and employer contributions.

Although local cities are trying to shift blame to the legislature for all their pension woes, State lawmakers have made several attempts to right the ship.  In 2011 lawmakers passed legislation to suspend Cost of Living adjustments and increase public safety personnel’s’ contributions.  In 2013, they partially eliminated pensions for new judges and elected officials.  And in 2016, they made modest improvements to the system going forward by creating a third tier of beneficiaries who would be subject to new provisions for pay-outs, cost of living adjustments, and employee contribution rates.  Although this latest legislation provides some cost savings in the future, it does little to nothing for the impending crisis everyone is currently facing.

For smaller cities, especially those that have stagnated growth, a lack of fiscal restraint, generous overtime and vacation, retirees who are living longer, and other factors have driven their contribution rates skyward.  Though the average jurisdiction contributes 32 and half percent, Bisbee pays almost 88 percent.  Bisbee is on the cusp of capsizing.  Cities have a habit of adopting each other’s bad ideas.  Over-recruiting, over-paying, and over-promising rich benefits in the future they can’t possibly make good on, is one of the worst practices that has spread among the cities like a plague.

Even with the knowledge that the bill has come due, cities are still trying to kick the can down the road to avoid the day of reckoning.  The City of Mesa and the City of Phoenix recently voted to extend their amortization schedules from 20 to 30 years for their pension debts.  For Phoenix, this freed up $50 million in additional spending capacity for the next year at a cost of $2.3 billion in additional debt on the backs of taxpayers.

One complaint that does seem to generate consensus among most cities and the legislature has been the inept management of the PSPRS system. The Pew Research Trust ranked Arizona’s PSPRS system as one of the worst managed in the country.  Last year, the fund only achieved less than a percent in returns.  In the past 10 years they averaged 3.67 percent returns; in the same period the S&P 500 achieved an average 7.88 percent returns.  These low returns have made a difficult situation nearly impossible to manage as liabilities continue to outstrip contributions to the fund.

The call by Arizona Mayors to wrestle control away from the PSPRS board is well founded.  Of the 73 largest public retirement systems in the country, PSPRS paid the highest percentage in fees for outside investment management – $129 million last year though they earned only $49 million in returns.  Compare this management to Arizona State Retirement System (ASRS), a fund 4 times the size, that performs in the top third of funds on investment returns and pays about four tenths of one percent the management fees PSPRS pays.

Arizona’s public pension system is in the 11th hour of unavoidable implosion.  A series of decisions by governments, elected leaders, and the courts have brought us to this situation and only these parties can correct it going forward.  The answer cannot be to expect taxpayers of fiscally prudent cities to subsidize the poor decisions of insolvent cities.  Nor can it be to drain the wealth of private citizens (and public employees coming under the third tier in the system) to bail out outrageously generous benefits of previous public employees.

The ship may be sinking, but taxpayers shouldn’t have to go down with it.

Prescott is at a crossroads.  Due to a crippling pension debt that has the city staring at possible bankruptcy in the next decade, the voters of Prescott will have an important decision to make in the upcoming election for Mayor.

Add in critical issues surrounding water and job crushing regulations, it is clear the decisions made by voters today will determine whether Prescott continues to grow and prosper for years to come, or begins down a path of financial and economic turmoil.

Currently there are three candidates vying for Mayor, and based on their public positions on the issues it is difficult to make an endorsement at this time. What is obvious is that there is one candidate that should be avoided by taxpayers at all costs.

Current sitting Councilwoman, Jean Wilcox, is the WRONG choice for Prescott Mayor.

Jean Wilcox has been a dedicated tax-and-spend politician from her first moments in office.  She has publicly supported increases in the sales tax, property tax, gas tax, and a water tax. It’s hard to find a tax Wilcox does not want to raise.

Since being elected to Council in 2014, Wilcox has been beating the drum to raise taxes at every turn.  The first tax increase she pushed for was an increase to the City’s sales tax in June of 2014.  She had barely taken office but it did not take long for her to be convinced that increasing taxes was the only option for the city.

Wilcox then voted in June of 2014 to raise Prescott taxpayers’ property taxes. While casting her vote, Wilcox arrogantly stated that she was disappointed that they were “stuck” with Arizona’s voter enacted constitutional limitations on how high property taxes could go.  Just two years later Wilcox voted again to raise property taxes.

After raising property taxes, Wilcox began pushing the council to increase water rates to pursue her environmentalist agenda and subsidize various crony capitalist pet projects.  When it comes to municipal water service, taxpayers should have 100 percent confidence that water rates are based solely on the cost of providing the service. Water bills shouldn’t include extra taxes and fees to pay for special interest projects, which is exactly what Jean Wilcox wanted to do.

Jean Wilcox used her position on the council to work around these important protections for rate payers.  Wilcox even entertained the idea that higher water fees could be cycled into select industries Jean Wilcox liked. In other words, she wanted to raise water rates in order to provide a few politically-connected commercial users with a subsidy.

What is even more telling of Jean Wilcox’s character is how she responded when voters didn’t agree with her high tax mentality.  Two years ago, Councilwoman Wilcox pushed to roll a series of tax increases for open space, pension funding and street improvements into one package. The purpose of this maneuver was to increase the chances that her favored tax increase—more money for open space—would pass.

She failed in this endeavor to log roll the measures and the triple tax proposition went to the ballot as three separate proposals.  After voters rejected two of the three measures, Wilcox expressed her disgust for taxpayers, stating those who did not vote for the tax were duped and that they “don’t understand that paying this tax will benefit the whole community.”

This is what Prescott residents must look forward to if they vote for Jean Wilcox for mayor.  Her love of taxes knows no bounds, and as Mayor she will have a lot more power to implement her agenda.

As Prescott prepares itself for the future, it is going to require a leader with a strong record of fiscal discipline.  That person is clearly not Jean Wilcox.

 

 

Paid for by the Arizona Free Enterprise Club. Not authorized by any candidate or candidate campaign committee.

For decades, despite overall decreased levels of service, the Federal Aviation Administration has struggled with bloated operating budgets, expensive personnel and benefits costs, and high unit costs per service.

As Congress considers a reauthorization package of the FAA, a new proposal to modernize Air Traffic Control (ATC) should be adopted.

Specifically, commercializing the nation’s air navigation infrastructure would benefit taxpayers by increasing efficiencies, improving customer responsiveness, and accelerating the adoption of new technologies.  All while saving users and taxpayers lots of money.

Many other countries have charted this course with much success.  The UK, Canada, Germany, and France all have commercialized air navigation.  Although there are variations, all are operated by private entities and have systems financed by users instead of taxes.

The private systems work while the FAA continues to struggle.  Since the 1990’s, lawmakers have set policy goals for the FAA, but with little to show for it.  In the last 25 years, Congress has adopted several key pieces of legislation to direct the agency to modernize its operations, cut costs, and improve efficiencies.

But a report published by the Inspector General of the Department of Transportation released in May of this year, shows that despite legislative action and significant resources poured into the FAA, there has been little to show for their “efforts.”

This should come as no surprise considering giant bureaucracies funded through general appropriations have no incentive to streamline their operations or respond to user needs and desires.  Despite the FAA undergoing a massive reorganization to reduce costs, between 1996 – 2015 the agency increased their operations account by 110 percent.

Even amid nine percent lower workforce levels and a constant number of facilities, compensation and benefits expenses doubled in that timeframe.  The fact is, because of outsized union influence, the FAA has not taken steps to reduce personnel costs, even though they were given great latitude in negotiating collective bargaining agreements.

Countries that permit private non-profits to run their air navigation systems have become hubs of technological innovation.

With transportation in this country undergoing a massive evolution, now is the time to tear down antiquated models and erect new, innovative and responsive models in their stead.  The current model has increased the tax and fee rate on the average ticket by 20 percent.  The old system for ATC does not serve taxpayers well. Consumers deserve better.



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The Arizona Free Enterprise Club is a free market policy and advocacy group dedicated to promoting a strong and vibrant Arizona economy.