Special pensions cost state millions

Among the winners are 6 ex-Pike managers expected to reap $3.7m in lifetime benefits

State and local governments over the last five years have committed to spending an estimated $115 million to $235 million on 386 public employees who were allowed to invoke an obscure part of a state law to win earlier and significantly larger pensions, a Globe analysis has found.

At the financially troubled Massachusetts Turnpike Authority, for instance, six former employees, including high-level Big Dig managers who were in their 40s and 50s, have taken advantage of the law to reap a combined $3.7 million in pension and lifetime health insurance benefits beyond what they would receive under normal pension rules, an average of more than $610,000 each.

The expenses, calculated by the Globe, were confirmed by the Turnpike Authority, based on state actuarial data on life expectancy and an examination of hundreds of pages of pension records. Many critics, including a few high-ranking state officials, believe that the law that allows for the enhancements should be repealed.

"When the Turnpike Authority needs every cent it can get, this benefits windfall is a thorn in our side," said Alan LeBovidge, executive director of the authority. "Our hands are tied, however, and we are required to abide by the letter of the law until this law is changed."

Although LeBovidge wants the practice outlawed, Turnpike Authority officials have taken unusual steps that allowed employees to get the enhanced pensions.

The law, passed in 1945, was intended to protect longtime public employees from politically motivated purges, guaranteeing them immediate and significantly higher pensions if their jobs are eliminated or if they are dismissed after at least 20 years on the job. Typically, workers in the state retirement system must wait until they are at least 55 to begin receiving a pension. Unions continue to defend the provision as necessary to help protect workers from being fired or to cushion the blow if they are.

In modern practice, the law has allowed some employees whose jobs are phased out, typically because of money-saving efforts by government, to start collecting pensions immediately. That has enabled some to move on to second careers in their 40s or 50s, with lifetime pensions that are extremely rare in the private sector. The typical profile is midlevel manager, not a rank-and-file worker.

"These kinds of special pensions are very costly and should simply be eliminated," Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, said in an interview. "They are just another example of sweetheart deals."

The six Turnpike Authority officials are among 386 former public-sector employees - including county employees and municipal employees such as teachers and school administrators, whose pensions also are governed by state law - to get the special benefits.

Extrapolating the costs of the turnpike managers across the entire pool of 386 employees, the state's tab for all such enhanced pension commitments over the last five years could be as high as $235 million. Using a more conservative estimate, with workers making half as much as the Turnpike Authority officials, the commitment for enhancements over the last five years would be $115 million.

Despite the cost to the state, Beacon Hill leaders are not clamoring to change the law, even at a time of big deficits. Through a spokesman, House Speaker Salvatore F. DiMasi declined to comment. Senate President Therese Murray declined to comment, said though a spokesman that "there are [Senate] members who are looking at that issue and other issues involving pensions."

A spokeswoman for Governor Deval Patrick, Rebecca Deusser, said, "While the original intent of this legislation was to protect state employees from unfair termination, it is clear that there are cases where it is being abused."

State Treasurer Timothy P. Cahill, whose office has broad oversight over the state retirement system, declined to comment, even though in 2004 he talked tough about overhauling the law in an interview with CommonWealth magazine.

Cahill's deputy treasurer, Nick Favorito, said in a written statement that the treasurer's office has helped to tighten the rules on enhanced pensions.

The law gives employees terminated after 20 years the right to an immediate pension, regardless of age, based on roughly 33 percent of their pay. They can receive the pension even if they switch to another public-sector job, including switching from one state agency to another.

Without the special provision, employees leaving their job ordinarily must wait to age 55 to begin receiving pensions, which are calculated as a percentage of their top pay, 30 percent for an employee with 20 years on the job, for example.

The law also allows such employees, many in their 40s, to begin receiving lifetime health insurance coverage, 80 percent of which is paid by their former employer. That's a value of about $12,250 a year for family coverage, according to the Turnpike Authority.

Ralph White, president of the Massachusetts Retirees Association, said the enhanced benefits are necessary to protect employees who want to spend their entire career in public service and build a bigger pension. To be terminated after 20 years deprives them of that goal, he said.

But Sam Tyler - president of the Boston Municipal Research Bureau, a business-supported watchdog group - said the enhanced pensions are too expensive for taxpayers and municipalities.

"The governor and the Legislature need to take steps to overhaul the state pension laws," he said.

Eric J. Waaramaa is among the Turnpike Authority officials who received such enhancements. In a 22-year career with the state and the authority, he worked his way up from planner to the authority's chief financial officer. But he was terminated last year without explanation, according to a letter dated Jan. 1, 2007, resulting in a $42,036-a-year pension. At the time, Waaramaa was 45 and earning about $105,000 a year. If he had waited till 55, his pension would have been $33,688 a year.

Since then, Waaramaa has worked at the MBTA as deputy director of financial planning, at a salary of $86,142. He picked a 401(a) retirement plan at the MBTA, under which the agency contributes about $6,900 a year toward his retirement.

In April, the Globe reported on the case of former Big Dig manager Michael Lewis, who last year, at age 46, began collecting a $72,578 annual pension. Lewis's job was eliminated, and he was dismissed because the Big Dig project came to an end.

Since leaving the state, Lewis has been hired by the state of Rhode Island as transportation secretary, earning $130,000 a year, which comes on top of his Massachusetts pension.

Patrick J. Moynihan, another former Big Dig director, also got the enhanced package in 2000. As the Globe reported in 2000, Moynihan was kept on the job as a "transitional adviser" six months after being fired as Big Dig manager, so he could attain the 20 years of state service that qualified him for the enhanced benefit.

On Oct. 16, 2000, Moynihan hit 20 years. It was his last day as a public employee. He was 46. Since then, he has worked for a public property management firm and a law firm. All the while, he has collected a $44,974 a year pension, plus insurance benefits.

Sean Murphy can be reached at smurphy@globe.com.