Pension reform bill solidifies system, protects taxpayers

by Glenn Hamer

February 11, 2011

Speaker of the House Kirk Adams is walking the talk at the Capitol with his calls for major reforms to the state's pension system.  The speaker has already withdrawn from the Elected Officials Retirement Plan, and this week he introduced House Bill 2726 (public retirement systems; plan design) which aims to put the state's public retirement plans back on stable footing.

The speaker's legislation comes on the heels of a series of articles last November by Arizona Republic reporter Craig Harris that found that Arizona's pension system is costing the state and local governments nearly $1.4 billion annually.  To put that in perspective, that's more money than the budgets for higher education and the corrections system. 

In announcing his reform plan, the speaker acknowledged last June's report by the Arizona Chamber Foundation, Pension Tension: Understanding Arizona's Public Employee Retirement Plans.  That paper found that at the beginning of the decade, Arizona's pension funds enjoyed a cumulative $4.7 billion surplus.  Since that time, however, asset growth has been unable to keep pace with the liability growth caused by a number of factors, including an expanding government workforce, rising salaries and legislative action that increased benefit levels. As a result, the $4.7 billion surplus has become a $10.4 billion deficit.

The changes Speaker Adams is proposing aren't just cosmetic.They are real, substantive reforms that are necessary if, as the speaker has said, we want that teacher who spent years of service in the classroom to have a stable retirement.

First, the legislation would require Arizona State Retirement System employees hired starting in July to work until they were 62 with 10 years or more of service, or until age 65 with less than 10 years of service, before they could retire with full pension benefits.

Currently, ASRS employees can also retire when they reach 80 points, which is determined by adding an employee's age to his or her years of service.  That number is scheduled to increase to 85 for employees hired after July 1.  HB 2726 would eliminate the points option.

The bill also would force ASRS employers like cities and school districts to make payments into the pension trust when they rehire ASRS retirees. Currently, employers make no payments into the pension system for these so-called "double-dippers" who draw a salary at the same time they're collecting a pension.  School districts, for example, could still hire back experienced teachers, but no longer would they be able to do so without making a contribution to the pension system.

The speaker seeks to put an end to automatic cost of living adjustments in all of the state's public employee pension systems.  Three of the four Arizona public pensions see annual COLAs irrespective of the state of the economy or the health of the particular fund.  The decision to increase an annual pension payout would be made by the Legislature and the governor through the regular appropriations process under the Adams plan. The lawyers will be gearing up over this one. Colorado, Minnesota, and South Dakota all passed legislation that reduced the size of COLAs for current retirees, and all three states were sued. 

Another big change the bill proposes is to, over a five-year period, bring state employer contributions in line with employee contributions.  Whereas ASRS matches employee contributions 1:1, some funds make a nearly 3:1 employer to employee contribution. By bringing all pension system employer contributions in line with the ASRS levels, the funds will become more stable while lessening the burden on the state employer, thus protecting taxpayer dollars.

The Adams plan also brings the elected officials retirement plan back to the real world.  There's no reason taxpayers should be funding extra generous retirement plans for elected officials.  

Shaking up the status quo when you're sure to face stiff opposition from entrenched public employee unions takes courage.  But if we want to ensure that our teachers, police officers and firefighters have retirement benefits they can count on in the future while protecting taxpayer dollars, then serious reforms are needed now.  Kudos to Speaker Adams for taking up the fight.

Arizona ready to answer president's challenge on education reform

January 27, 2011

Glenn Hamer

I'm writing this week from Washington, D.C., where I find myself snowed-in.  I was supposed to be home Wednesday night, but Mother Nature had other plans.  I'm now more familiar with Reagan National Airport's dining options than I ever thought I would be. 

But the snowstorm has given me plenty of time to think, and I couldn't help but reflect on President Obama's State of the Union speech from Tuesday night.

Like any State of the Union, the president's speech contained a little bit of everything.  He discussed government spending, the deficit and his pledge to veto spending bills containing earmarks.  He touched on the complicated tax code, and called for simplifying the corporate-tax code, which was a welcome olive branch from the White House to the business community, which has so far had a frosty relationship with the president.

But what made me take notice and draw a clear connection to what's happening in Arizona was the president's focus on education, and what he called a "Sputnik moment." 

The president said, "Over the next 10 years, nearly half of all new jobs will require education that goes beyond a high school education.  And yet, as many as a quarter of our students aren't even finishing high school.  The quality of our math and science education lags behind many other nations.  America has fallen to ninth in the proportion of young people with a college degree.  And so the question is whether all of us -- as citizens, and as parents -- are willing to do what's necessary to give every child a chance to succeed."

The president then went on to make the case that Race to the Top should be the roadmap that we as a nation follow to raise our educational standards.  Race to the Top was a two-phase competitive federal grant fund that rewarded states for reform plans that prepare students for success in college and the workplace, builds data systems that track student growth and success, and recruits and retains top teachers. 

Gov. Brewer has already identified Race to the Top as a key element of her recently announced education reform plan, which is the second cornerstone of her Four Cornerstones of Reformpolicy agenda.  Gov. Brewer's goal is to turn the state's Race to the Top application into a reform plan with goals and yearly benchmarks for increased student achievement, improved graduation rates and increased post-secondary success.

One of the drivers of the governor's education reform efforts is her chief of staff Eileen Klein.  Having met Eileen years ago on a school reform issue and having worked with her when she chaired the Arizona Chamber of Commerce and Industry's Public Affairs Committee, I can't think of a more passionate champion for education reform to confront this challenge for Gov. Brewer.

The governor's plan answers the president's call to improve our data systems for tracking student performance over time.  She pulls no punches in her plan when she calls the state's current education data system "unreliable and out-of date."  Her fiscal year 2012 budget includes a plan to fund a new data system and oversee its development, with the goal of being able to measure accurately and reliably the performance of students, teachers and schools.

Some of the statistics out there are downright scary. If you saw George Will's latest column, he cites OECD data that show that only four other member nations have high school dropout rates worse than America's.  They're great tourist destinations, but we don't want to be sharing such close company in the educational realm with Mexico, Spain, Turkey and New Zealand. 

The states can be the laboratories for real educational success.  While the federal government can set the standard we want to meet, the states can decide how to get there.  As Will points out, 50 state-level approaches to education reform "might yield a few that are truly superior."

Arizona has made significant reforms already.  Our state is a leader in the school-choice movement, we've overhauled teacher tenure laws and we've instituted easy-to-understand school rankings using letter grades.  But the governor should be applauded for recognizing that so much more needs to be done to prepare our state's students to be tomorrow's workforce.

I've used this space many times to remind policymakers that businesses give a hard look at our state's education system when deciding whether to make or increase their investment in Arizona.  That talented engineer that an aerospace company wants to recruit here might be a parent, and he or she will likely consider what kind of educational options will be available to his or her kids.  Our education system can be a deal maker, or deal breaker.   

There are a lot of ingredients that go into the recipe for a successful economic strategy. Gov. Brewer isn't leaving a world-class education system out of the mix.

Appeal Bond Caps Protect Defendants' Due Process

January 20, 2011

Glenn Hamer

Recovering the nearly 300,000 jobs the state has lost in this Great Recession is at the top of the Arizona Chamber of Commerce and Industry's legislative agenda in 2011.We're working with legislative leaders and the governor to help craft a package that will create an environment that helps attract and retain jobs. 

We all know that a jobs-friendly tax code is critical to improving Arizona's competitiveness in the region, the country and around the globe.We're advocating for a reduction in the corporate income tax and a cut in the business property tax as ways to raise the state's profile as a great place to do business.

But also important to a state's ability to attract and retain jobs, but not discussed as much as the tax picture, is its legal environment.If a state has gained a reputation for being a home to frivolous lawsuits and billion dollar judgments, then that's a red alert to companies to stay away.

In 2011, we're working to advance legislation that would place a monetary cap on appeal bonds.

As discussed in the recent Arizona Chamber Foundation Policy Brief, Bonds. Appeal Bonds: Protecting the Right to Appeal in the Era of Multimillion Dollar Verdicts, defendants in the Arizona legal system may not have adequate access to a full and fair appeals process.

At the conclusion of a trial, the plaintiff or defendant has the right to appeal the judgment. But to stay the execution of the judgment and protect assets from collection, a defendant must post an appeal bond. Those bonds are usually set at a level equal to the full amount of the judgment, so in cases with large judgments, a defendant could be forced to cease operations or liquidate assets in order to post the bond. To stave off bankruptcy, defendants often seek a settlement, effectively cutting them off from the appeals process and their full due process. 

Thirty eight states have made moves to restore defendants' access to a fair appeals process by placing monetary caps on appeal bonds, and five others do not require any appeal bond, automatically staying the execution of the judgment when an appeal is filed. Arizona is one of seven states that offer no such protection to defendants, creating an environment for plaintiffs' lawyers to pursue cases that are intended only to force a settlement. 

State Sen. Al Melvin (R-26) is preparing to introduce legislation to implement caps on appeal bonds and, as a result, make Arizona a better place to do business.

Sen. Melvin hit the nail on the head when he said, "A state's legal environment is just as important as its tax and regulatory environment.Job growth is hamstrung when businesses spend more time shielding themselves against frivolous lawsuits than they do hiring or engaging in other beneficial economic activity.A cap on appeal bonds is a commonsense reform that is not only good for business, but it will help restore defendants' full due process rights."

This type of legislation won't earn Sen. Melvin any valentines from the trial lawyer lobby, which is loathe to support any reforms that could lessen their chances at extracting big settlements from defendants who would rather settle than risk financial collapse.But Sen. Melvin deserves applause from those of us in the business community for reminding his colleagues that Arizona can't claim to be friendly to job creators if we're not willing to make needed reforms in our legal environment.

Public and workplace safety critical component of medical marijuana law implementation

January 13, 2011

Glenn Hamer

The Arizona Chamber of Commerce and Industry last week submitted comments in response to draft regulations published by the Arizona Department of Health Services regarding the management of the distribution and use of medical marijuana in our state under the Medical Marijuana Act.

The Chamber opposed the medical marijuana initiative when it was on the ballot last fall and we were disappointed that Proposition 203 passed, albeit by a razor-thin margin.  But the people have spoken, and now it's incumbent upon the state to implement the law in a responsible manner and for employers to update their own drug policies to reflect this important change.

The implementation of this law is critical to Arizona communities.  We do not want to face the same scenarios that states like California and Colorado have struggled with, as pot dispensaries have popped up like - forgive me here - weeds on street corners throughout communities.

In Los Angeles alone, pot dispensaries in that city went from 183 to over 800 between 2007-2009 before a city ordinance capped the number of dispensaries and regulated their geographic distribution.       

Californians seemed to have grown weary of the affect the wide availability of marijuana has had on their state.  Voters there in November rejected a ballot measure that would have legalized marijuana beyond its medicinal use.

Having gained the perspective of other state's implementation of their own medical marijuana laws, the Chamber is urging that the law be implemented in as strict a manner as possible.  Our position does not come from some uncaring desire to deny relief to patients in pain.  We know that for patients, their families and caregivers, chronic pain and illness can be a terrible burden.  But we have serious concerns over how this new law will affect the safety of the workplace, medical marijuana patients, their coworkers and the public at large.

We're especially concerned over the concept of "impairment," a term that is used but not defined in the Medical Marijuana Act.  It's important to get this right because the new law says that an employer cannot discipline an employee who might have the presence of marijuana in his or her system if it "appears in insufficient concentration to cause impairment." 

This is critical for employee drug testing.  An employee sample might show the presence of marijuana, but no employer drug test can measure impairment.  There is not the equivalent of an alcohol breathalyzer for marijuana. 

Our recommendations for defining impairment make sense for employers and the safety of the general public.  We're not just talking about jobs that have obvious public safety components to them like bus drivers or pilots, but for the plumber who's in your house and risks flooding your bathroom or the electrician who could make a mistake that knocks out your power.

We also want to make sure that only the most qualified individuals can be certified to possess marijuana dispensary registration certificates.  The Act says that only one dispensary can be established for every 10 pharmacies in a given area, but it doesn't contemplate what happens when more than one prospective dispenser applies for the same area.  The Chamber advocates for the establishment of a ranking system that weighs applicants' ability to secure their inventories among other factors. 

Security issues figure prominently in our comments as we recommend the storage of marijuana inventories in secure locations and containers in case of break-ins and theft; electronic record-keeping to track the transportation of marijuana product; and the use of biometric identifiers for medical marijuana users to thwart fraud. 

The Chamber is an unabashedly pro-free market organization, so it's not lost on us that we're recommending a pretty tough regulatory structure for medical marijuana.  But we believe that without clear rules for the use and distribution of medical marijuana and easy-to-understand consequences for non-compliance, that we risk the potential for abuse of the system that could jeopardize the public's welfare.

Minimum Wage: The gift that keeps on hurting

January 05, 2011

Glenn Hamer

I started off the first business day of the New Year on Monday by turning to the opinion page ofThe Arizona Republic, where writer Alicia Russell rang in 2011 by cheering the recent $.10 hike in the hourly minimum wage.  Russell was the treasurer for the 2006 ballot campaign that allowed for an annual raise based on an increase in the Consumer Price Index. 

In her column, Russell touts the wondrous effects the wage hike will have on Arizona workers and employers.  Workers will have more money in their pockets, while employers will see less absenteeism, better employee morale and improved productivity.

But before we're overcome with happiness, the reader is warned that "industry-backed opponents, on cue, will blame the unemployment crisis in our state on the minimum wage and say that this raise will cost more workers their jobs. But that's not fair or true."

Ok, I'll bite.  As an "industry-backed" opponent, I'll agree that it's not fair or true to say that the minimum wage is to blame for the state's unemployment crisis.  But it's not helping.

The minimum wage hurts more people at the bottom of the wage scale than it helps, creating another barrier of entry into the job market for folks without experience or skills.   

The state's minimum wage is now higher than the federal minimum wage, and the Obama White House is making noises that it wants to push the federal rate even higher to $9.50 per hour. 

According to November 2010 employment data, the unemployment rate for teenagers - a group made up mostly of the inexperienced and unskilled - is 24.6 percent.

Jobs that pay the minimum wage are ones that often give Americans their first entry into the job market.  According to researchers at the Economic Policies Institute, minimum wage workers are "often young, inexperienced, and working part-time. They're often employed in low-margin industries like food preparation and service." 

But when the minimum wage spikes, employers are not able to absorb the increase and have to cut positions.  Thus the minimum wage ends up hurting the very people - those on the first rung of the career ladder - that it was supposed to help.

The automatic cost-of-living increase is especially pernicious.  When the CPI goes up, so does the entry-level worker's salary.  The state's minimum wage law does not take into consideration whether an employee is deserving of a raise, whether there's been a commensurate rise in output or whether the employer can afford it. 

So, faced with an increased payroll that it can't afford, a company has to scale back, and it's the unskilled and inexperienced worker that pays the price.

Think back to your first job.  At the time you may have been just been doing it for the money; maybe you wanted to buy your first car or a new stereo or save money for college.  But the lessons you learned and the experience you gained in that first job likely outweighed whatever money you made.  Entry level jobs are a critical stepping stone in a career path.  You learn a little about what you like to do, what you don't like to do and you learn a lot about responsibility.  It's too bad that those that claim to be advocates for workers at the lower end of the pay scale are actually cutting off access to these important jobs.

The Hammers: Glenn Hamer's year-end awards

DECEMBER 22, 2010


The Arizona Chamber of Commerce and Industry is wrapping up 2010 and getting ready to welcome 2011 as we prepare for the next legislative session.

But before we say goodbye to 2010, I wanted to look back on the year and hand out some recognition for the leaders and events that made us applaud, and those that made us cringe.

So, without further ado, I bring you the first annual edition of the Hammers...

Politician of the Year, National: Marco Rubio

Sen.-elect Marco Rubio captured the Republican nomination for U.S. Senate in Florida over popular Gov. Charlie Crist, who cut his losses and chose to run as an Independent.  Rubio generated the type of national enthusiasm rarely seen for a Senate candidate while overwhelming Crist and Democratic nominee Rep. Kendrick Meek in the general election.

Politician of the Year, State: Jan Brewer

The Hammer goes to Gov. Brewer for the steady hand she kept over state government in the face of a deep, deep recession and her big election wins: a sales tax increase via Proposition 100 and her own re-election to another term on the ninth floor.  Many had written her candidacy off in early 2010, as Republicans lined up to face her in the GOP primary and a popular Democrat attorney general waltzed unopposed in his party's primary to the general election.  But Brewer came roaring back and cruised to electoral victory as she became the national face for an America fed up with a Washington, D.C. government that can't control the country's borders, is spending our grandkids' money and is passing huge new health care mandates.  I also extend an honorable mention to Brewer campaign consultant Chuck Coughlin, who oversaw an excellent campaign.

Biggest Disappointment, National: The passage of the health care bill

The new national health care law is going to place a huge burden on the states as Medicaid rolls expand, crushing state budgets already hemorrhaging red ink.  There's no debate that the U.S. health care system needed serious reform as far too many Americans are uninsured.  But for the majority party to ram this plan down the throats of the American people is not only disappointing, but it played a big role in Democrats' loss of over 60 House seats in November.  

Biggest Disappointment, State: Rep. Raul Grijalva calls for a boycott of Arizona

The Hammer goes to  Raul Grijalva for his call for a boycott of Arizona in the wake of the passage of SB 1070.  We can disagree over the best way to deal with illegal immigration, but hurting people economically who had nothing to do with the law's passage is just wrong.  The boycott call almost cost Rep. Grijalva a super-safe congressional seat to an outstanding rookie GOP candidate.  Rep. Grijalva thankfully recognized the error of his ways and withdrew the boycott call.

Best Political Book of the Year: The Blueprint: How the Democrats Won Colorado (and Why Republicans Everywhere Should Care)

In The Blueprint, authors Adam Schrager and Rob Witwer take a Hammer-winning in-depth and non-partisan look at how Colorado Democrats in four years racked up win after win after win.  With a combination of big bucks, committed leaders and solid planning, Colorado Democrats put on a masterful performance from 2004-2008.  Republicans across the country should pay attention.

The Rudy Giuliani Problem-Solver of the Year: Chris Christie

This was the year of New Jersey Gov. Chris Christie.  When videos of your town halls hit the Web and go viral, you know your message is cutting through the noise; and it earns you a Hammer.  Christie rolled up his sleeves and made the cuts that previous governors wouldn't, stood up to the unions who had run New Jersey and helped make pension reform the next hot topic in policymaking circles.  Though he says he's not interested, many Republicans are wishing and hoping for a Christie presidential run.

The State's Most Influential Unelected Official: Eileen Klein

The Hammer goes to Eileen Klein in her role as chief of staff to Gov. Brewer.  Her rave reviews from constituencies across the state speak to her outstanding abilities as the governor's top staffer during a time of economic crisis.  We at the Chamber know Eileen from her time as the chair of our Public Affairs Committee, so her accomplishments come as no surprise to us. 

Best Investigative Journalism: The Arizona Republic's "Public Pensions: A Soaring Burden"

Reporter Craig Harris and The Arizona Republic win the Hammer for their series on the state's public pension system.  The stories were exhibit A of the power of strong investigative journalism.  His series will be felt for generations to come, as his reporting already has pension managers and legislators proposing fixes to preserve the state's retirement system.

Most Under-Reported Story of the Year: Arizona's regulatory reforms

Companies consider a state's regulatory environment when making a decision where to locate or expand their operations.  Red tape is not part of a recipe of economic success.  Led by Gov. Brewer, Majority Leader Andy Tobin and Senate President Bob Burns, Arizona made big strides in the regulatory arena in 2010 to show the rest of the world that business is welcome here.

Flameout of the Year: Meg Whitman 

She spent $160 million on her campaign, but former E-Bay CEO Meg Whitman still lost to 1970's rerun Jerry Brown in the California governor's race.  So much for California being on the cutting edge.  This is the equivalent of America re-electing Jimmy Carter for president.  But California's goof can be Arizona's good fortune.  The next legislative session presents a great opportunity to pass a job-creation bill to show a clear distinction between the business environment of Arizona and our friends to the west.

The Don't Be Gone Long Award: Rep. John Shadegg

The Hammer goes to retiring Rep. John Shadegg, who is leaving Congress after winning his first election as part of the historic freshman class of 1994.  Rep. Shadegg has always stayed true to the values espoused in the Contract with America, even when many of his colleagues compromised their principles.  Rep. Shadegg comes from a prominent political family.  His father, Stephen Shadegg, was a close adviser to Barry Goldwater and wrote the still-influential How to Win an Election.  Rep. Shadegg could write the sequel.  You'll be missed, Congressman.

All of us at the Arizona Chamber want to wish you and yours a safe and prosperous New Year.  We'll be back in 2011 to continue our advocacy for our state's business community and working hard to make Arizona's economy strong.

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry.