Committee approves new PSPRS pension-funding policy to smooth contributions

The Oro Valley Budget & Finance Committee voted unanimously April 16 to adopt a revised funding policy for the town’s Public Safety Personnel Retirement System (PSPRS) obligations. The policy shifts how excess contributions are set, using the actuaries’ normal cost rate as a baseline and adding steady excess contributions to avoid “peaks and valleys” in required payments.

Staff presenter David Gabbard told the committee the approach compares the total PSPRS contribution to the Arizona State Retirement System (ASRS) total-contribution rate and, where appropriate, uses a percentage-based baseline rather than a hard-dollar fixed amount. “What we are trying to do again is really level this out a little bit,” Gabbard said during the presentation.

Staff showed two modeled scenarios. In the primary scenario—using a 7.2% assumed earnings rate—staff presented an initial excess contribution in the first year (shown in staff slides as $2,500,000) followed by approximately $800,000 per year for several years; that scenario reached an estimated 100% funded ratio in roughly three years. In an alternative scenario that reduced the assumed earnings rate to 6.5%, staff showed the town would need a substantially longer schedule of excess contributions to reach 100% funding, pushing the target many years farther into the future.

Commissioners pressed staff on the assumptions and dollar impacts. Commissioner Joyce Garland asked for concrete examples of how the ASRS baseline would translate to PSPRS payments; Gabbard responded that the comparable employer contribution piece for ASRS in the example would be roughly $1,045,000 and that management proposed using that as a baseline with additional contributions on top.

Gabbard said the town’s closed PSPRS plan and a relatively larger asset base make added contributions more impactful now than prior years, when similar dollars had less effect. He also noted the plan target of reaching full funding by 2036 under the amortization schedule discussed in the presentation.

The committee approved the draft policy and asked staff to include the modeled contributions in the upcoming five-year forecast and to continue refining the presentation for Council review. The motion to adopt the PSPRS funding policy passed unanimously.