Bigger pensions drawing protests
Lawmakers' initiative could cost $6b or more; Critics say state, towns can't afford increase
Massachusetts lawmakers are proposing bigger pensions for state and municipal employees that could cost $6 billion or more, according to some estimates, triggering a chorus of complaints from fiscal watchdogs and local leaders who say the money is not there to pay for it.
The union-friendly, election-year maneuvers by the House and Senate would increase the annual cost-of-living adjustments that retirees receive as part of their pensions.
The individual numbers are seemingly small, a boost of about $120 a year more for every retiree, which advocates say is well-deserved. But multiplied by over 100,000 former teachers and state workers in the state's pension system as proposed by the House and by 86,000 municipal retirees as envisioned in a Senate amendment, it would add up fast, say critics.
"It's a tremendous gesture, but the money doesn't exist," said Mayor Scott W. Lang of New Bedford, who says he would have to lay off six current employees to make it work for the city's 1,721 retirees. "I have absolutely no qualms whatsoever of bumping that to meet the inflationary needs, but there's no funding. Without the funding it's illusory."
Over the next several weeks, the provisions will be the subject of negotiations in House-Senate budget conference committee meetings, which largely takes place behind closed doors.
The state is considering the new spending as it is already raiding its rainy-day fund, raising some taxes, and looking for cuts to balance the budget while repairing crumbling roads and bridges. It also comes as pension payments are being pared back by corporations across the nation.
But advocates and lawmakers who drafted the legislation say Massachusetts' public retirees deserve to have their pensions updated. "They should receive a cost of living that more adequately reflects inflation," said Representative Frank Hynes, a Democrat from Marshfield and chief advocate of the House legislation.
"It's $10 a damn month; that's all it is," said Ralph White, president of the Retired State, County and Municipal Employees Association of Massachusetts.
The legislation, which was added as amendments to the budget, would still have to be approved by all members of the House and Senate, who are running for reelection this year.
If it passes, it would present a major test for Governor Deval Patrick. Patrick campaigned in 2006 against passing laws for special-interest groups but also counts unions among his key supporters. Patrick, through his spokesman, said the issue is in conference committee and has yet to come to his desk.
The pension increase for state employees alone would cost between $3.8 billion and $8 billion over 20 years, according to the Pioneer Institute, an independent nonpartisan think tank. A separate Senate amendment allowing municipal retirees to opt in would cost cities and towns at least $2 billion, according to the Massachusetts Municipal Association.
Proponents said those numbers were inflated, although they did not have firm estimates of their own. White said the increase from the pension increases would be as little as $1 billion.
Several outsiders criticized state lawmakers for adopting the changes as part of budget deliberations but without an in-depth analysis or hearings.
"This should not even be discussed until there's an understanding of the cost and a complete exploration of how this will be paid for," said Geoff Beckwith, executive director of the Massachusetts Municipal Association, which represents cities and towns and is mobilizing local officials to oppose the measure. "This is not a cart before a horse; this is the freight train before the process."
Public employee pension and healthcare costs have been at the center of debate over Proposition 2 1/2 tax override votes in communities across the state. But Senator Marian Walsh, a Democrat from West Roxbury who led passage of the legislation in the Senate, said that "this has been a very open, transparent discussion."
Cities and town officials, she stressed, would have to vote before the pension increases took effect for municipal employees.
State pensions in Massachusetts are adjusted nearly every year by the Legislature, which controls the state pension system. Local officials control municipal pension systems, although changes are limited without state approval.
The Legislature designates a flat dollar amount to use in calculating annual pension increases; since 1997 the dollar amount has been the first $12,000 of a pension.
Since 2000, the Legislature has granted a 3 percent increase each year, calculated on that $12,000 base. The result has been a flat $360 boost every year for every retiree with a pension of more than $12,000.
The budget amendments, which cleared the House and Senate this month by unanimous votes, would raise the base amount to $16,000. With the same 3 percent bump on that new base amount, the flat fee for every retiree would rise to $480, a 33 percent increase.
Because the average pension for state retirees is about $22,000, the shift would mean almost every employee gets the maximum increase. To pay for the pension boosts, state lawmakers are using an approach that State Treasurer Timothy P. Cahill called risky for state credit ratings.
The state is currently on track to fully fund its pension system - meaning that if everyone retired at the same time, the state could afford to pay everyone's retirement - by 2023. To pay for the pension boosts, legislators want to stretch that goal to 2026, which lawmakers say would give them longer to pay off the added expense.
"It's the wrong thing to do," said Cahill, who supports the pension increases but fears that the Legislature's approach will put the state's credit rating in jeopardy.
He has urged lawmakers to fund the increases through state budgets, which would add at least $110 million to each of the next three state budgets, rather than pushing the payments off.
Matt Viser can be reached at maviser@globe.com. 