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Democratic Gov. Pat Quinn on Monday signed into law a measure that would cut pension benefits and raise retirement ages for some City Hall workers, granting Mayor Rahm Emanuel a victory but opening himself up to attacks from Republicans who contend the move will trigger property tax hikes in Chicago.
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Yesterday's Boston Globe editorialized that while Governor Patrick deserves credit for attempting to help cities and towns trim the health insurance benefits of public-sector retirees, his proposal does not go far enough.
Gov Patrick's plan "would tighten eligibility requirements for retiree health coverage; instead of qualifying at age 55 with 10 years of service, many public employees would need to wait until at least age 60 and have 20 years of service." And he would include current employees. Municipalities think the proposal does not go far enough - Patrick would freeze the percentage of retiree health insurance premiums — which now averages 70 percent — borne by local taxpayers, while cities and towns would like the flexiblity to . That might assuage some public employee unions. But it would strip municipalities of the only real tool they have to control costs. That freeze provision needs to go.
According to this New Yorker blog post, a federal judge has said Detroit could legally cut the pensions it has already promised to workers as part of its bankruptcy plan, even though the Michigan constitution says the government can’t go back on pension promises. The justification for this decision is that federal law supersedes state law "and, according to Judge Steve W. Rhodes, pension cuts are just fine under federal law."
Retirees who are counting on pensions for their retirement and as a result have no other savings to rely on will be left high and dry if more cities do what Detroit is doing.
According to the Beacon Hill Institute, Massachusetts faces a $23 billion pension liability that is currently unfunded. Cities and towns across the state face billions more in unfunded pension liabilities.
What does our future hold? Are we doing to leave retirees in the lurch, a la Detroit? Or will we act now to implement prudent reforms that allow us to make good on our promises but stop promising more than we have.
Excellent op-ed by Farah Stockman in today's Boston Globe questioning whether the Boston City Council should approve a 25% pay raise for Boston police over six years:
Here’s a fun fact that didn’t come up in yesterday’s City Council hearing: 141 cops in Boston earned a bigger paycheck than the mayor did last year. That’s right. Mayor Menino earns $175,000. If you count base pay, the Quinn Bill education bonus, details, and overtime, 141 cops earned more.
Another fact: Nearly a third of all Boston police officers earned more than Governor Deval Patrick. The governor earned $137,000 last year. About 600 cops took home more.
No one disputes that police officers, many of whom work long hours and face danger in their jobs, deserve to be well-paid for what they do. But take a good look at police salaries, and you’ll find that they already are.
Boston police officers are among the best-paid public employees, not only in the city, but in the country. Eighty-six earned more than Secretary of State John Kerry. Nine earned more than the vice president. As in, of the United States.
She goes on to note that the average patrolman took home $109,847 in 2012 which is far higher than many Boston residents earn, and to point out what the city will not be able to afford if this pay raise is passed:
If police accepted a 12 percent raise like everybody else, the city would have an extra $71 million over six years to make a game-changing investment in something else. That’s enough to send 7,100 kids to a year of quality preschool, something Marty Walsh called a top priority. Consider that a grant of just $4 million helped turn Orchard Gardens K-8 school from one of the city’s worst schools into one of the best. If police took a 12 percent raise, instead of 25, we could afford 17 more Orchard Gardens. The arbitrator mentioned that police keep us safe, and that safety is the key to prosperity. He’s right. But the highest level of safety and prosperity will be achieved when everyone in this city has a shot at a good education and a job, not just Boston police.
According to today's Boston Globe, Gov. Patrick released a plan today in which future state and municipal retirees would have to pay $1,000 more a year for health care coverage:
Why is he taking this step? Because "state and local governments cannot support the $40 billion they face in long-term health care costs." Meaning the taxpayers cannot afford this long term liability!
The Globe reports that the governor’s proposal is a result of a commission consisting of labor and retiree groups as well as state and local officials. This should give it a higher likelihood of passing, but it will doubtless still be an uphill slog so if you support it, let your elected representatives know!
1. Call or email the governor and thank him for taking this step to rein in future liabilities on the taxpayers.
2. Contact your state rep AND your state senator and urge them to support the governor's retiree health care cost reform package!
Remember the triple dippers? The folks getting a pension, unemployment, AND a paycheck? Well the Municipal Unemployment Insurance Task Force has published a report and a set of common sense solutions, including:
■ A legislative change that would no longer allow retirees who return to work for their previous public sector employer to collect unemployment if their annual pension is $53,920 or higher, because their pension offset would be the same as or greater than their unemployment benefit.
■ Employees who work at schools but are not paid by schools — such as crossing guards — would become ineligible to collect unemployment benefits during vacations.
■ Teachers who are informed in the spring they may not be hired back in the fall remain eligible for unemployment insurance, but under a new system being implemented by the Division of Unemployment Assistance, those benefits will stop if teachers receive notification they have been rehired for a comparable position by their current school district or another school district.
(Here is the Boston Globe article on this topic from a few weeks ago)
What is the lesson learned from the WIsconsin election result? That Democratic leaders should not assume that their voters are knee-jerk pro-public sector union. 17% of pro Scott Walker voters said in exit polling that they support President Obama, but only 6% of anti-Scott Walker voters said they are supporting Mitt Romney.
Deval Patrick and Democratic House and Senate leaders in Massachusetts showed with their support for municipal health care reform last year that it is possible for Democrats to do right by the public (in that case, schoolchildren) even when it means bucking the unions. If Democrats did more of that, they'd probably win over more voters.
... this one isn't true anymore, thanks to Voters Count!
From the Sunday Globe editorial page: "The Patrick Administration is pushing ahead with a costly and unfair policy by imposing a project labor agreement on the $260 million reconstruction of the Longfellow Bridge. Its rationale for falls far short of justifying a union-workers-only pact that would put upward pressure on the project price, while effectively excluding the state’s many non-union construction workers and firms from the project.
...Restricting competition in that manner carries a cost. A study of Massachusetts school construction projects by the Beacon Hill Institute, Suffolk University’s market-oriented think tank, estimated that PLAs added 12 percent to construction costs. (Institute studies of school construction in Connecticut and New York found that PLAs led to even larger increases in bids or actual construction costs). Even if the effect were only half that, it would mean an extra $60 million for these two projects. The state can’t afford to pay that kind of pointless premium. The Patrick administration should reverse this decision."
From yesterday's Wall Street Journal is this piece about RI State Treasurer Gina Raimondo who achieved the following changes to RI pension rules:
- Shifts all workers from defined-benefit pensions into hybrid plans, which include a modest annuity and a defined-contribution component;
- Increases the retirement age to 67 from 62 for all workers;
- Suspends cost-of-living adjustments for retirees until the pension system, which is only about 50% funded, reaches a more healthy state.
Ms. Raimondo is a Democrat, former venture capitalist, was a Rhodes Scholar at Oxford and has a bachelor's in economics from Harvard and law degree from Yale.
"A government that doesn't work is in no one's interest," she says. "Budgets that don't balance, public programs that aren't funded, pension funds that are running out of money, schools that aren't funded—How does that help anyone? I don't really care if you're a Republican or Democrat or you want to fight about the size of government. How about a government that just works? Put your tax dollar in and get a return out the other end."