August 3, 2008

Governor Supports Boosting Pensions of County Retirees $5 a Month Per Worker Translates to Thousands for Towns

By Edward Mason, The Eagle-Tribune, North Andover, Mass.

Aug. 3--It's an increase of only $5 a month for county retirees, but it would cost communities fighting to make financial ends meet tens of thousands of dollars each year.

Gov. Deval Patrick has approved a plan to boost the pensions of Essex County retirees. The Essex Regional Retirement Board pushed the measure, which would increase the annual cost-of-living adjustment given to the system's 1,623 retirees, and cost North Andover and 47 other cities, towns and municipal authorities whose retirees belong to the system a total of $535,000 a year.

A majority of the retirement board's member treasurers now must approve the pension hike for it to take effect. The increase is separate from the pension increase for state workers approved by the Legislature last week.

Cyndi Roy, spokeswoman for the governor, said Patrick approved the legislation because retirees deserved a raise.

"At a time when retirees on fixed incomes are being squeezed by rising energy costs, this small increase ... will give retirees ... an extra $5 a month," Roy said.

Timothy Bassett, executive director and chairman of the county retirement board, said it's a modest increase for retirees struggling to keep up with rising gas, oil and food costs on an average annual pension of $16,000.

"It's $5 a month, $60 a year," Bassett said. "That's not a lot of money."

The law provides raises for the retirees in this way: The Essex Regional Retirement Board helps retirees keep up with inflation by adjusting their pension upward by 3 percent each year. That 3 percent raise is calculated only on the first $12,000 of their annual pension, which comes to $360 a year. Under the new law, they would get a 3 percent raise on the first $14,000, or $420 a year.

Essex County retirees are not eligible for Social Security benefits unless they worked at one time in the private sector.

Earlier this year, the Legislature rejected a plan to raise the pensions of 86,000 municipal retirees statewide, after the Massachusetts Municipal Association warned of the cost to struggling cities and towns. Local communities are concerned about the Essex Regional plan.

North Andover, the system's largest member, would pay the most, $82,596. Town Manager Mark Rees said asking his town to pay more for anything is a worry.

"Obviously, we're always concerned when our costs go up for any reason," he said. "We have a limitation on our revenue sources. I can say a proposal like this would see a great deal of scrutiny before it's endorsed."

Bassett said the plight of financially troubled communities was considered when the decision was made. The amount on which pension increases are calculated could have been higher.

"It's only the first $14,000 because we thought it was affordable for the communities in our system," Bassett said.

The Regional Retirement Board includes the towns of Boxford, Essex, Georgetown, Groveland, Merrimac, Newbury, Rowley, Salisbury, and West Newbury, as well as local housing authorities and school districts. Other Merrimack Valley communities such as Haverhill, Lawrence, Methuen and Andover are not part of the county retirement system. They have their own retirement funds.

Even with the governor's signature, the pension hike isn't a sure thing. Cities and towns still get to vote on whether to implement the plan.

After becoming law, the proposal would be vetted in public hearings across Essex County. It would then have to be sanctioned by a majority of the treasurers of the system's 48 members. In years that follow, the Essex County Retirement Board would be able to raise the base in $1,000 increments with the approval of a majority of the members.

A financially troubled community or authority would have to pay the increase if most Essex members approve the raise.

"It's majority rule," Basset said.

Georgetown would have to kick in $25,885, which town Treasurer Jacqueline Cuomo said would be tough.

"Obviously, it would be very difficult," Cuomo said. "We're strapped this year."

Cities and towns could get relief. A provision in the bill would extend the time the Essex Regional Retirement Board has to come up with the money needed to pay all of its retirees. Right now, it has until 2028, but it would have until 2038 under the bill.

But that, too, has been criticized.

Steve Poftak, research director at the Pioneer Institute, a conservative think tank, likened the provision to mortgage payments. Extending the time to pay off the liability may lessen individual payments, but the additional accrued interest adds to the overall cost. Poftak said he doesn't have an issue with helping poorly compensated retirees but warned against raising the costs to communities.

"These folks (retirees) aren't getting rich," Poftak said, "but it comes with a cost."


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