Peoria: Rep. Phil Lovas Carries Bill to End Generous Pensions for Arizona Elected Officials

A Peoria Republican is carrying a bill that would eliminate the generous pension system Arizona lawmakers, judges, and governors have used for decades. The proposal converts the retirement plan from a guaranteed benefit to a 401(k) style account for anyone elected after July 1.

Rep. Phil Lovas, R-Peoria, is the sponsor of the legislation. House Speaker Andy Tobin, R-Paulden, is pushing the measure as part of a broader push to reform state pension systems.

A pension system critics call 'lucrative'

The current Elected Officials Retirement Plan allows public officials to retire after 20 years of service at 80 percent of their highest salary. That benefit is nearly double what most other public employees receive through the Arizona State Retirement System.

The plan also calculates pensions based on the average salary of the last three years of service, not the entire career. That structure creates opportunities for large payouts.

A lawmaker could serve 16 years in the Legislature at $24,000 per year. Then a single four-year term on the Arizona Corporation Commission, which pays $79,500, would qualify the person for annual pension payments of $63,600, according to the Tucson.com report.

"Tobin's proposal, being carried by Rep. Phil Lovas, R-Peoria, would convert the elected official pension from a 'defined-benefit' plan, with payments guaranteed at a certain level based on years of service and salary, to a 'defined-contribution' plan."

Former Governor Jane Hull serves as a prominent example. She earned no more than $95,000 during her tenure from 1997 to 2002. Cost of living increases tied to her legislative service have since pushed her annual pension above $100,000.

How the new plan would work

The proposed legislation shifts to a defined-contribution model. The state would contribute a set amount to each official's account. The worker would match that contribution. The final pension would depend on investment performance.

The changes would not affect anyone currently in office. The Arizona Constitution prevents retroactive changes to active retirement plan benefits. The new rules would apply to anyone not holding office as of July 1.

The plan also covers judges, who participate in the same retirement system. The Arizona Judges Association has publicly opposed the proposal.

Pete Dunn, lobbyist for the Arizona Judges Association, said the proposal keeps a "very good plan" for current officials while imposing what he called "the worst pension plan in the state" on new officeholders.

Dunn argued the reduced benefits would deter qualified attorneys from seeking judicial seats. He said the result would be a weaker judiciary.

Tobin says reform starts with lawmakers

Tobin told reporters that all four state pension systems need overhaul. He said lawmakers should begin with the plan that affects them directly.

He also described the elected officials' plan as the most underfunded of the state pension systems when comparing current assets to future liabilities.

Lawmakers have attempted previous reforms. They placed limits on cost of living increases for retirees. They required active officials to contribute more to the fund.

Those changes triggered lawsuits from active and retired judges. The judges argued the changes violated their constitutional rights. Courts have ruled in favor of the judges so far.

The new legislation sidesteps that legal problem. It applies only to future officeholders, not current ones.

What happens next

The bill is moving through the House. If it passes both chambers, it would take effect July 1. Any candidate elected to state office after that date would fall under the new defined-contribution system.

The outcome could reshape who runs for Arizona's elected positions. Critics say smaller retirement benefits will make public office less attractive to candidates who currently maintain outside careers.