Scottsdale discusses $179M unfunded liability for police and fire pension plans

The Budget Review Commission meeting held on February 28, 2025, in Scottsdale, Arizona, focused on the city's pension funding strategies, particularly concerning the Public Safety Personnel Retirement System (PSPRS) for police and fire departments. The discussions highlighted the city's efforts to address its unfunded pension liabilities, which have been a growing concern.

During the meeting, it was reported that Scottsdale made additional payments totaling $59.5 million from 2021 to 2024, beyond the annual required contributions for police pensions. These efforts, combined with investment earnings, have reduced the unfunded liability to approximately $143.8 million, as per the latest valuation. However, questions arose regarding the rationale behind these extraordinary payments and the potential trade-offs involved, particularly concerning maintenance and repair budgets.

Commissioner Newman raised concerns about Scottsdale's unfunded liability levels compared to other communities, noting that the city's liability appears significantly higher. The discussion emphasized the importance of understanding the sustainability of contribution rates and the impact of economic fluctuations on the unfunded liability. The commissioners debated the appropriateness of aiming for a zero unfunded liability versus maintaining a reasonable level that ensures financial stability for the city.

The meeting also touched on the funding levels for the fire department, which is reportedly in a healthier position with an 80% funding status, compared to the police department's recent rise to just over 70%. The commissioners acknowledged that while paying down the unfunded liability is essential, it is equally important to consider the opportunity costs, such as funding capital projects that could benefit the community.

As the meeting concluded, the commissioners agreed on the need for further analysis of the city's pension funding strategies, including a review of historical trends and the potential impacts of various funding levels. The discussions underscored the ongoing challenge of balancing pension obligations with other city priorities, ensuring that promises made to public safety employees are met without compromising the city's financial health.