Oro Valley commission delays recommendation on PSPRS pension funding policy amid budget concerns

The Budget and Finance Commission on April 15 discussed a draft pension funding policy for the Public Safety Personnel Retirement System (PSPRS) covering the fiscal year ending June 30, 2026, and voted to continue the item to the next meeting for additional information.

Mr. Gephardt, the town’s staff liaison, told commissioners state law requires the pension‑funding policy to be updated annually and summarized the draft policy and recent actuarial results. He said the plan’s employer contribution rate is scheduled to decline from about 16.22% to 12.61% next year, based on the actuarial report, and that the plan’s unfunded actuarial liability is “a little over $1,200,000.” He added the actuary’s assumed long‑term rate of return is 7.2% and the actuarial (smoothed) rate of return for 2024 was about 7.1%, while market value returned about 10.2% in 2024.

Policy proposal and staff recommendation Staff recommended the town not reduce its actual contributions even though the actuarial recommendation would lower the formal employer rate. “We’re going to contribute more excess contributions because our normal, required contributions… are scheduled to drop,” Mr. Gephardt said. Under the draft policy, total contributions next year are estimated at roughly $2.83 million — essentially unchanged from the current year’s total contributions when required and excess contributions are combined.

Commissioner concerns and context Commissioners raised questions about the budgetary impact of maintaining higher contributions given other pressures. One commissioner asked how an extra roughly $0.5 million in contributions would affect the general fund and capital spending. Mr. Gephardt acknowledged the tradeoffs, saying contributing now reduces long‑term cost but creates near‑term pressure on the general fund and capital flexibility. He also said an ongoing memorandum of understanding with the Police Officers Association could increase future PSPRS liabilities once salary changes are finalized and reflected in the actuarial valuation.

Next steps and action After discussion, the commission voted to continue consideration of the draft PSPRS pension funding policy to the next regular meeting so staff can provide additional analysis, including financial impacts tied to pending labor negotiations. The presenter said the item must be recommended to the council no later than June 30 to meet Arizona statutory requirements.

Ending Staff also said the town has engaged a consultant to model financial impacts of proposals under consideration and that more detail should be available at the next meeting. Commissioners did not adopt the policy and directed staff to return with supplemental information.