House, Senate agree on plan to curb pension excesses

More than five months into the legislative session, the pension pact also will represent passage of the first significant bill of any kind this year, aside from a handful of emergency budget provisions.

The pension changes were welcomed by Democrats, Republicans, and even state employee unions, who said a coterie of politically connected officials and various politicians have given tens of thousand of hard-working state retirees a bad name.

"There are a few people in an elite category who have taken advantage of these loopholes," said Ralph White, president of the Retired State, County and Municipal Employees Association of Massachusetts.

The state's leading Democrats have worried about the lack of action at the State House on important reforms, especially in the wake of last week's indictment of former House Speaker Salvatore F. DiMasi and a group of his close associates on federal corruption charges.

Top lawmakers and the governor portrayed today's announcement of agreement on pension reform as a major victory for the public.

Senator Steven C. Panagiotakos, a Lowell Democrat, called it a "monumentally important step" and Representative Robert Spellane, a Worcester Democrat, proclaimed, "We have begun to restore the public's trust...in government."

"This is an important time for the Commonwealth, and for all of us here on Beacon Hill,” Senate President Therese Murray said in a press conference held in the Senate Reading Room.

But tensions among the state's top Democrats were still on full display. Murray, who called House Speaker Robert A. DeLeo “my partner in the Legislature,” mentioned everyone standing beside her at an afternoon press conference except the governor, who was just feet away. But Patrick did get his turn at the podium, although he never introduced his own pension reform legislation..

"We are going to deliver on pension reform in Massachusetts," said Patrick, agreeing with all of the changes. "It’s a very, very good day."

Approving pension reform would resolve one of three major issues that state lawmakers have been grappling with. Conference committees have also been meeting for several weeks to come to agreement on ethics and transportation reforms. Agreements on those issues are close, but several sticking points remain, and agreements may not arrive until next week.

The Senate, which last month unanimously approved an ethics bill that gutted the state Ethics Commission, is planning to meet tomorrow with Ethics Commission chairman Charles Swartwood, a former federal magistrate judge.

Patrick has threatened to veto a legislative plan to raise the state sales tax from 5 percent to 6.25 percent unless the House and Senate first approve reforms that he finds acceptable. He held his fingers an inch apart yesterday and said, “We are this close.”

The changes to the state's pension laws would apply to both current and future state workers, after DeLeo dropped his strenuous opposition to allow the changes to only apply to future employees. DeLeo had previously argued, including as recently as Monday, that his approach would protect the state from potential lawsuits for changing benefits to workers who had already been vested in the current system.

“That’s what compromise is all about,” DeLeo said, without elaborating. When asked whether there were any agreements made on other pieces of legislation in return for his dropping his opposition, he said, “I have not received any promises for anything.”

Allowing the changes to apply to current employees – and not just new hires -- would be significant. The Globe reported in May that, under existing law, nearly half of the 200-member Legislature are on track to be eligible for early, enhanced pensions potentially worth hundreds of thousands of dollars each. The compromise bill would apply to all current employees who retire after July 1.

State lawmakers characterized the pension legislation as a first step, one that largely addresses the symbolic abuses that resonate in the public, and they vowed to make further changes in the future that could save the state substantial money. The legislation calls for establishing a commission to review broader changes and issue a report by September 1.

"There needs to be a Phase two, clearly," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation.

But, he added, "In this building, to close these abuses is no small feat...There's this endless stream of people playing inside games, and this closes a lot of those loopholes."

Some future changes could include capping the maximum amount for state pensions, or increasing the number of years used to determine an employee's pension. Current laws call for averaging the highest-grossing three years, but changing that to five years could result in substantial savings, Widmer said.

Another change not addressed in the legislation that is expected to be approved Thursday is aligning MBTA employees' pension with the state system and eliminating the policy that allows employees with 23 years of service to retire with benefits regardless of their age. The provision has allowed workers to retire in their 40s and then take other jobs while collecting pensions.

State lawmakers said yesterday that generous provision will be eliminated in a transportation reform package that is expected to come up later this month.

Some of the other changes that lawmakers have agreed on include:

-- Removing a provision that credits a full year of service to employees after they have worked as little as one day in that year.
-- Preventing elected officials from claiming a "termination allowance" that has been granted after they have failed to win re-election.
-- Changing the current accidental disability retirement benefit for individuals who are injured while temporarily filing in for their supervisor. Some firefighters in Boston have collected pension benefits based on their bosses' higher pay level after they were injured on the job while subbing for them.
-- Limiting the definition of "compensation" to only wages and salary, and specifically excluding housing benefits, annuities, or the use of motor vehicles. This would prevent presidents at the state's public colleges and universities from counting housing and transportation allowances as compensation.
-- Eliminating a current provision that allows certain officials to establish pension credits for holding unpaid jobs.

Matt Viser can be reached at maviser@globe.com.