Pension boost OK'd for state workers
Patrick signals support; critics rail at huge cost
Massachusetts lawmakers, moving quickly and without debate in the final hours of the legislative session, approved a pension increase for state workers that could cost more than $3 billion over the next 20 years, sparking criticism from fiscal watchdogs who say the state cannot afford such a costly benefit.
The bill, which was strongly backed by unions in the midst of an election year, would increase the annual cost-of-living adjustments by about $120 per year for retired teachers and state employees, helping them afford the spiraling cost of fuel and food, supporters say. But because the number of eligible retirees is so vast - about 100,000 would receive the benefit - the cost could reach $2.7 billion to $3.5 billion by 2026, according to the Massachusetts Taxpayers Foundation, a business-backed fiscal watchdog group.
"There is no money to pay for this enhanced benefit, regardless of the merits," Michael J. Widmer, the foundation's president, said yesterday. "It's another example of the administration and the Legislature passing a benefit and simply passing the buck to a future taxpayer. . . . it's the height of irresponsibility."
The initiative comes at a time when state leaders are struggling to find a way to fix dilapidated bridges, pay for the rising costs of the state's healthcare law, and provide property tax relief to cities and towns that have been forced to layoff workers and slash budgets. A previous version of the bill would have been even costlier, requiring municipalities to offer the same benefit to their retirees. Legislators dropped that portion after an outcry from local leaders.
The boost for state retirees also comes at a time when cost-of-living increases are almost unheard of for pensions in the private sector - and private pensions themselves are becoming, in some ways, a thing of the past.
Governor Deval Patrick has signaled his support and said in a statement released yesterday: "At a time when fuel and energy costs are on the rise, even a limited increase will help retirees living on a fixed income."
Patrick, however, is still reviewing the details of the bill and has not decided whether he will sign it, said his spokesman, Kyle Sullivan.
State pensions in Massachusetts are adjusted annually by the Legislature, which for the past eight years has given a 3 percent increase on the first $12,000 of retirement pay - or $360 each year. Under the legislation, the increase next year would be granted on the first $16,000 for workers with pensions of less than $40,000. The following year, all retirees would have a base of $16,000, leading to an annual bump of $480.
"While it may not be a lot, it's something," said Senate Minority Leader Richard R. Tisei, a Wakefield Republican. "You have to treat the people who have worked for the state for decades fairly - a lot of these people worked in the '40s, '50s, and '60s, so they didn't make a lot anyway. Most of their pensions aren't very large."
How much the legislation will cost depends on whether the Legislature pays for the long-term cost of the benefit up front, a scenario that most acknowledge is unlikely, or stretches out the payments over decades.
The increase sailed through both branches on voice votes Thursday before receiving final approval in the Senate about 9:30 p.m., just hours before the end of formal sessions at 1:30 a.m. There was no opposition, said a chief backer of the plan, Ralph White, the president of the Retired State, County and Municipal Employees Association of Massachusetts.
"In the Legislature itself? No," White said yesterday. "There were varying opinions but no one opposed it. I think we did a god job of lobbying, truthfully." The association estimated it would cost less than $1 billion, in sharp contrast to the taxpayer foundation's estimate. Both organizations said they based their estimate on a 2005 report by the Public Employee Retirement Administration Commission. Widmer acknowledged that the cost could be as low as $1 billion, but only if the Legislature decided to pay for all of the annual increases up front.
Steve Poftak, research director at the Pioneer Institute, an independent nonpartisan research group, said he was troubled that legislators never had an open debate about whether the money would have been better spent on education or roads and bridges.
"There's demand for spending on education and transportation infrastructure, and what they've said is, 'We're going to allocate this money for retirees,' " Poftak said. "I understand the impulse, but I don't think they've thought through the financial implications."
Supporters said that over the last three decades, the cost of living has far outpaced the adjustments made to retirees' pensions. The average pension for a retired state worker is about $22,000 and for a retired teacher about $32,000, White said.
Tisei said an increase was long overdue.
"This is something I feel that you have to do," he said. "It's probably not the best timing, but state retirees traditionally have gotten the short end of the stick when it comes to cost-of-living increases."
Michael Levenson can be reached at mlevenson@globe.com. 