THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
Patrick’s second term | Globe Editorial

For a more stable future, state should rein in pension costs

January 1, 2011

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FEW ISSUES create as much justifiable outrage in Massachusetts as exploitation of the public pension system. So Governor Patrick, Senate President Therese Murray, and House Speaker Robert DeLeo deserve some credit for their past efforts to end the most egregious abuses.

For example, legislation passed in 2009 nixed “king for a day,’’ the ability to claim a year’s pension credit for one day worked; stopped the practice of granting pension credit for volunteer positions; and prevented future pension pig-outs of the sort former University of Massachusetts chief William M. Bulger secured, by excluding non-salary benefits from retirement calculations.

Those changes were symbolically important, because they exposed the ways that powerful insiders had abused the system. But their effect on long-term pension finances will be relatively minor. The more serious financial concern isn’t the laughable excesses, but the regular benefits that far exceed the private sector. The Massachusetts system has an unfunded liability of $19 billion; the state spent $1.1 billion in this fiscal year alone to address that chasm.

Patrick proposed a broader overhaul in his first term, but it stalled in a Legislature wary of antagonizing unions. That’s foolhardy: The unfunded liability is a yoke around the state’s neck, preventing future initiatives that would enhance the state’s quality of life and economic viability for all its citizens. Patrick’s challenge for the coming term must be to find a way to preserve the basic expectations of state workers, while achieving some savings within the current system, and enacting a significant restructuring of the system for future workers.

Between recommendations from the Massachusetts Taxpayers Foundation, the work of a blue ribbon commission that scrutinized the pension system in 2009, and Patrick’s past proposal, there’s no shortage of good ideas for changes that would provide proper security for future public employees without strangling future taxpayers.

First, retirement ages need to rise. To reflect increasing longevity, Patrick has advocated hiking the early retirement age for general public employees from 55 to 60, the full retirement age from 65 to 67. For police and firefighters, the governor has recommended that ages go from 45/55 (early/full) to 50/57. These are reasonable changes — ones that would still leave state workers better off than most of their private-sector counterparts.

Second, the way benefits are calculated should be adjusted. Rather than basing them on an employee’s top three earning years, a longer period should be used. That would render it harder to game the system through short-term earnings enhancers like overtime or late-career promotions. And it would conserve funds: Moving from three to five years saves $200 million over 30 years.

Nor should employees be able to spike benefits by landing a job in a more lucrative retirement group late in their careers. Rather, their pension should be pro-rated to reflect the time they actually worked in each category.

So-called Section 10 benefits, which boost pension payments if an employee is terminated after 20 years for reasons unrelated to job performance, have been nixed for elected officials. Now they need to be eliminated for all future public employees.

Legislative efforts to secure special pension deals for individuals should be discouraged by requiring both a cost evaluation and a recommendation by the state retirement board.

Finally, policy-makers should take a serious look at consolidating the 100 or more separate public pension systems in the state into one that is overseen by the state treasurer.

Changes like these are certain to arouse opposition, as Patrick learned when his last effort stalled. Thus they will require determined gubernatorial leadership, and legislators willing to take the long view. Despite union opposition, reform is essential to put the pension system — and the state budget — on solid, equitable, and sustainable footing.