Senate approves pension overhaul
Bill would cut benefits for future state workers
The Massachusetts Senate passed legislation yesterday that would make public employees work longer for less benefits in an effort to shrink an estimated $20 billion unfunded liability in the state pension system.
The bill, which cleared the Senate by a vote of 24 to 10, is designed to save the pension system $5 billion over 30 years by reducing the benefits of public employees hired after Jan. 1.
The proposal heads next to the House, where Speaker Robert A. DeLeo has not yet set a date for debate and a vote.
Senator Katherine Clark, a Melrose Democrat who is cochairwoman of the Joint Committee on Public Service, insisted that the proposed cuts are necessary to ensure that the plan remains solvent for the next generation of public employees.
“This is not the beginning of dismantling what we have,’’ she said at the outset of debate yesterday. “It is crafted to protect what we have.’’
Reducing the benefits of unionized workers has traditionally been a tough sell in labor-friendly Massachusetts, and supporters of the overhaul acknowledged during the four hours of debate that the bill is unpopular with organized labor, a major constituency of the Democratic Party.
“This is not the kind of legislation that’s going to win somebody a popularity contest, but frankly the responsibility is ours,’’ said Senator Stephen M. Brewer, chairman of the Ways and Means Committee and a Democrat from Barre.
He said that, unlike pension changes passed in other states, the Massachusetts cuts would not affect current employees,
“What we are doing is not Wisconsin,’’ said Brewer, a reference to a rollback of union rights in that state pushed by Governor Scott Walker, a Republican. The changes which provoked waves of protest and prompted recall efforts against several state senators.
The Massachusetts proposal would raise the minimum retirement age for most public employees from 55 to 60 and would bump up the retirement age for maximum benefits from 65 to 67. It would also change the way benefits are calculated, basing them on a worker’s top five years of earnings, rather than the top three years, as is currently the practice.
Opponents of the legislation said yesterday that it is unfair to push the burden of reducing a deficit onto future employees.
“We’re saying that down the road, because we don’t know them, that they get penalized,’’ said Senator Steven Tolman, a Brighton Democrat expected to become the new president of the Massachusetts AFL-CIO in an uncontested election next month. “We have a problem; I’m just not sure we have the right fix.’’
Tolman, an active participant in the debate, voted against the bill. He said he consulted with the Senate counsel’s office and was told he could participate because he has not yet been appointed or elected to a new position. He will resign from the Senate after he takes the union post.
In effort to lessen the burden of the proposed changes on future long-term employees, the bill would ease early retirement penalties and lower the salary contribution rate for most employees and teachers who have worked at least 30 years, according to a summary released by Senate President Therese Murray.
The overall proposal is similar to a plan offered in January by Governor Deval Patrick, a Democrat.
Patrick said after the vote that he appreciates that public employees feel under siege, as cash-crunched states across the country have looked to squeeze savings from their workers.
“I think there is a sentiment, among the union leadership anyway, that public employees have been at the sharp end of a lot of reforms,’’ Patrick said in an interview. “But this has been done in a very sensitive way that strikes, I think, an appropriate balance, and I do want the people that work in state government to know that we respect them.’’
Bond rating agencies are watching the progress of the pension bill to see that the state follows through on plans to cut pension costs, said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a business-backed budget watchdog group.
“The rating agencies expect $5 billion in savings,’’ said Widmer, and it is “enormously important’’ that the state hit the target. If the agencies lose confidence in the finances of state government, they could reduce the Massachusetts bond rating, which would increase the cost of borrowing money.
State leaders met last week with representatives of the nation’s three main rating agencies to discuss the state’s economy and the overhaul legislation, Murray said.
“A strong bond rating saves the Commonwealth millions of dollars a year in interest payments and increases funding available for our schools, roads, and bridges,’’ Murray said in a statement after the vote. “And these latest reforms will help sustain and protect our system for hard-working, deserving employees.’’
But opponents said the proposal will discourage young people from seeking jobs as police officers, firefighters, and teachers, because future public employees are being singled out to solve an unfunded liability that they did not create.
“There should be a shared-sacrifice approach,’’ said Senator James B. Eldridge, an Acton Democrat.
David J. Holway, president of the National Association of Government Employees, predicted in an interview that “state government is going to become a revolving door.’’
In good economic times, workers will bolt for the private sector, robbing the public of the institutional knowledge needed to make their government run smoothly, he said.
“I know [pension reform] is a very sexy subject nationally, but I’m worried about our future work force.’’