Yesterday (02.17.2011), the House Employment and Regulatory Affairs Committee voted 5-4 for HB 2726, a bill attempting to reform our pensions systems.  CLICK HERE TO WATCH THE VIDEO OF THE HEARING.  The general consensus from the remarks from committee members during and after the vote took place were that there was still a lot of changes to be made.  Those committee members that voted no all echoed that the bill was unconstitutional, agreeing with AHPA’s position that it diminishes benefits to employees under Article 29.  AHPA is thankful Chariman Robson allowed groups to be heard at the hearing, as this will be a living document that will carry on throughout the bill’s process.  

The committee and members of the public in attendance seemed to be alarmed that:

1.    The Speaker of the House (sponsor of the bill) had not met with police organizations regarding the bill.

2.    Stakeholders, like the police organizations, have not been able to sit at the table in order to fix any pension issues.

3.    That actuary numbers from the police proposal have not considered by legislative members, when the proposal could be more sustainable than the original bill and is not unconstitutional.  

The Arizona Police Association Executive Director, Brian Livingston, spoke first at the hearing.  He pointed out, on your behalf:

1.    Case law to committee members that demonstrated the bill was unconstitutional under Arizona and Federal Law.  The current pension system was promised to every officer, and any change would be breaking a contract.

2.   From 2001-2002, the pension system lost much of its value with no explanation, losing $1.6 Billion dollars.  Whose fiduciary responsibility was it to prevent such catastrophic loses?  The current fund’s manager explained the reason why the fund lost so much money was due to an overconcentration of system internally managed portfolio in technology/telecom securities.  The system’s administrator at the time, Jack Cross, made the decision to invest heavily into these high risk investments into the tech/telecom world.  The “high risk bet” did not pay-off.  

3.   With the previous fund manager, there was no accountability or documentation on investment decisions.  APA knows of no documents that might shed light that Mr. Cross received from advisors or what he disclosed to board members.  No documentation has been provided to APA regarding who approved decisions on investments or if documents were made public.

4.    If the fund did not lose so much money ($1.6 Billion dollars), we would not be in this situation today.

5.    Excessive legal costs of $200,000 to $300,000 monthly (yearly $2.4 to $3.6 Million dollars) were charged to the fund.  Up to 28 attorneys at one time we asked for legal opinions.  APA has asked for what reason, what cost and who approved these expenditures, with no answer.

6.    Regarding COLA adjustments, a market rate of 70% is not obtainable for most, if not all, current retirees for an estimated 20 years.  Using actual numbers versus a market rate is reasonable.  Eliminating COLA’s is not acceptable to any organization in APA.

AHPA will continue to keep you updated on how this bill progresses.  Please feel free to contact a board member, or myself, if you have any questions.  

Sincerely,  Jimmy Chavez, President

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