The town of Queen Creek has become the first to fully fund its employee pension reserves.
Pension contributions are a major component of government budgets, with many communities making strides to pay down unfunded pension liabilities in both the Public Safety Pension Reserve System and the Arizona State Retirement System.
As part of Queen Creek’s fiscal year 2022 budget, which runs July through June 30, 2022, the town fully funded its ASRS pension reserve. The town’s public safety pension reserve is already fully funded, making the town the first municipality in the state to have fully funded pension reserves.
These reserves eliminate the need to pay down large unfunded pension liabilities from the town’s operating budget in the future and saves nearly $2 million annually.
“The council has taken an aggressive approach to addressing pension debt,” stated Queen Creek Town Manager John Kross in a press release. “More than five years ago, we took a hard look at the impact of unfunded pension reserves and worked to create a comprehensive plan to get to where we are today – and quite frankly the hard work has paid off.”
In 2015, the Queen Creek Town Council approved a pension funding policy that included a payoff of the town’s unfunded liability for the fire department – a recurring annual savings of $135,000.
In 2018, the town’s pension funding policy was expanded, setting aside resources for the town’s estimated share of the Maricopa County Sheriff’s Office unfunded pension liability. At that time, the town also took significant steps toward funding its ASRS reserve requirements.
In 2019, the council-approved budget fully funded the fire and Maricopa County Sheriff’s Office pension liabilities and included a five-year plan to fully fund all pension reserves, which was completed early with the approval of the budget in 2021.
“Queen Creek is committed to financial stability and providing a secure future for our community,” stated Queen Creek Mayor Gail Barney. “Taking incremental steps to achieve a fully funded pension reserve is a key component of being fiscally minded and ensuring a strong future for this fantastic community.”
The town’s current budget includes funding for the transition to the Queen Creek Police Department in early 2022. Once the transition is complete, the town will no longer have to fund the pension reserve for MCSO but instead will be able to use those pension reserves toward its future police pension obligations.
Not only does fully funding the town’s pension reserves save money over time and result in sound policy, it has also been instrumental in the town’s bond rating. In 2019, Queen Creek’s bond rating was increased to AA, the third-highest rating possible, by Standard & Poor’s, a leading provider of credit ratings. Several items were noted for the bond rating increase including financial management policies, specifically the pension funding policy.