Mass. House to take up pension funds bill

Leaders of a key legislative committee have reached agreement on another portion of Governor Deval Patrick's municipal relief plan, which would require underperforming local pension funds to join with the state's highly successful pension system.

The full House is expected to take up the bill tomorrow, and the Senate is likely to consider it within the next two weeks.

If it passes, then the assets of about two dozen local pension funds would be turned over for management by the state's pension system.

The difference between what those communities' pension funds earned over the last decade and what they would have earned if they had been invested with the state is at least $700 million, according to the Joint Committee on Public Service.

"We thank the House and Senate leadership for taking this step to help our cash-strapped cities and towns relieve the pressure on the property tax," the governor's office said in a statement last night.

"Passage of this piece of the governor's municipal partnership act will yield significant savings for taxpayers and assure retirees get the benefits they deserve," the statement said.

The pension bill is part of a sweeping package proposed by Patrick earlier this year to help communities save money on pen sions and health insurance.

It is also intended to reduce their dependence on residential property taxes by allowing them to raise small levies on rooms and meals and by ending a property tax exemption for telecommunications companies.

Last week, the House passed legislation that would let communities save money by buying health insurance through the program the state uses to buy insurance for its employees.

The fate of another proposal, which would end a property tax exemption on telecommunications equipment, remains unclear, while Patrick's proposal to allow localities to impose a local meals tax and increase the local hotel tax appears to be stalled.

Patrick's original proposal would have required local pension funds to transfer their assets to the state pension system if they were less than 80 percent funded and their performance lagged at least 2.25 percentage points behind the state fund's annualized return during the previous five years.

Between 2001 and 2005, the state fund's annualized rate of return was 7.04 percent.

According to the administration, the proposal would have dissolved about one-third of the state's 107 public pension funds into the state fund, including the system overseen by the Massachusetts Turnpike Authority.

The committee's version would set a slightly lower bar.

It would require the state pension fund to manage all public funds that are less than 65 percent funded, and whose annualized performance has been at least 2 percentage points lower than the state's over a 10-year period.

According to the committee, the state pension fund's annualized rate of return over the last decade was 10.51 percent.

If the bill passed, 25 public pension systems would be subsumed by the state fund, based on the most recent data available, according to the committee.

They include the funds run by Fall River, Springfield, Pittsfield, Plymouth, Lynn, and Lawrence, as well as six of the state's 14 counties.