August 5, 2008

Pension Boost for State Retirees: County Workers Ask: Where’s Our Increase?

By Matt Murphy, The Sun, Lowell, Mass.

Aug. 5--BOSTON -- About 4,000 municipal retirees in Middlesex County will not receive the same modest boost in their pensions that the Legislature approved last week for retired teachers and state employees.

With the cost of gas, food and electricity on the rise, both the Legislature and Gov. Deval Patrick have noted that retirees on fixed incomes could use the help, albeit small, to make ends meet. The plan, however, calls for only state employees and retired educators to get the $120 bump.

"We would certainly support an increase in the (cost-of-living-adjustment)," said Thomas Gibson, chairman of the Middlesex Retirement System, which represents retirees from 31 cities and towns and 41 county governmental organizations. "I'll tell you we get calls every week from retirees pleading with us to find some way to increase their pension. Every dollar counts for these folks."

Both the House and Senate last week passed legislation granting retired teachers and state employees a $120-a-year boost in their pension by changing the formula used to calculate cost-of-living adjustments, or COLAs.

The governor must still sign the bill into law. Though he has expressed support, the governor's staff said Patrick is reviewing the minor changes made in the House and Senate.

The move, which received little debate as lawmakers found themselves up against the clock Thursday, was backed strongly by unions but has been criticized by fiscal watchdogs as a luxury.


Senate originally tried to give local retirement boards, such as the Middlesex Retirement System, the option of increasing the COLA base to $16,000, but met with stiff opposition from the Massachusetts Municipal Association, which doesn't think cities and towns could absorb the cost.

"A lot of our retirees are upset, and they'll be even more upset when I tell them the state is going to get a raise and they're not," Gibson said.

State pensions are adjusted annually by the Legislature, typically awarding retirees a 3 percent bump on the first $12,000 of their pensions. The new law calls for that base to be increased to $16,000 for workers whose pension is less than $40,000 for fiscal year 2009, which started July 1.

After this year, all state retirees and teachers would have a COLA base of $16,000, giving those former employees a $480 annual bump instead of $360.

"When you think about it, these people are being stretched thin, too," said state Sen. Steve Panagiotakos, a Lowell Democrat and chairman of the Senate Committee on Ways and Means. "I think it was a good time because it's not costing us any extra money this year."

The decision to defer paying for the pension increases, however, only highlights the fact that the state can't afford the raises, said Michael Widmer, executive director of the business-backed Massachusetts Taxpayers Association.

"It's like so many programs," Widmer said. "Is it wrong to enhance their pension by $10 a month? No. But do we have the money to do that? Absolutely not. So what are we doing?"

The Massachusetts Taxpayers Association estimates the pension boost could end up costing the state between $2.7 billion and $3.5 billion by 2026.

Since 1988, the state has been working to pay off its unfunded pension liability by 2023. The legislation just passed defers all payments for the new increases to 2024.

"What seems like a very small change has an enormous cost because of the numbers, and there has been no public hearings or analysis done about whether the state can afford this because it can't," Widmer said.

More than 100,000 workers stand to receive the benefit, adding up to about $20,000 to $30,000 over the life span of any one retiree.

Patrick tried to limit the pension boost to just those retirees collecting less than $40,000, which would have covered about 87 percent of state workers.

The Massachusetts Teachers Retirement System said about 30,000 of its 50,000 members earn pensions smaller than $40,000 a year.

"I think they'll be happy to receive some additional help with this modest increase," said MTRS Assistant Executive Director Sean Neilon, noting that Massachusetts has some of the smallest postretirement COLA benefits in the country.


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