SAN FRANCISCO, March 22 Moody's Investors
Service said on Friday it has a mixed view of two pension
measures overwhelmingly approved by voters in Phoenix, Arizona
earlier this month.
"Proposition 201 is credit positive as it provides Phoenix
modest long-term savings. Proposition 202 provides the city more
financial flexibility, but could introduce additional risk," the
rating agency said in a report.
Proposition 201 raises contribution rates and service
requirements for new employees covered by the City of Phoenix
Employee Retirement System. Proposition 202 adds financial
flexibility to how the city manages its pension liabilities.
The first measure is expected to save the city budget an
estimated $49.8 million a year by 2037 as new city workers
replace existing employees.
Public pension expenses have come under increased scrutiny in
recent years as state and local governments have had to respond
to lean revenues by cutting services while at the same time
making payments to retired public-sector employees whose
pensions are guaranteed.
With pension payments locked in for current retirees and
public employees, state and local officials have increasingly
looked to provide less generous pension benefit for future hires
and to require them to contribute more toward their retirement
accounts. Future hires also face more years on the job to accrue
full pension benefits.
Phoenix's Proposition 202 allows the city to make extra
contributions to the pension system in years when it has
available resources to do so instead of having to hew to
The measure also allows the board of the pension fund
greater leeway to diversify the mix of the fund's asset classes.
That could be risky, according to Moody's.
"We note that additional investment flexibility is a
positive, but diversification impacts aside, venturing into new
asset classes could create new risks," Moody's said. "While the
enacted reforms should improve funding levels, the net impact is
uncertain because actual investment returns might deviate from
assumed rates of return.
Moody's rates Phoenix's general obligation debt 'Aa1' with a