The Commonwealth of Massachusetts has a liability of almost fifteen billion dollars in terms of the total amount owed to current and future retirees.
To meet these obligations, the state will have to devote larger and larger shares of the budget to pay them down. This means cuts in services to help offset the rise in pension costs, OR higher taxes to both meet the obligations and maintain services.
We do not begrudge public employees their pensions. Most public employees are hard working, taxpaying residents of the Commonwealth. They are not eligible for Social Security, and the average pension is not exorbitant - it is roughly $41,000 for each person for each year as long as they live. But, as the Boston Globe has reported on numerous occasions, there are exceptions. Some insiders have found ways to pad their pensions, including:
1) Legislators who have served at least three terms and who leave office – whether voluntarily or voted out -- are eligible to receive one-third of their salary as a pension, starting immediately (the cost to state taxpayers: $3 million a year),
2) Lawmakers receiving a pension while working a full time job,
3) Lawmakers boosting their pensions based on volunteer work.
Some of the worst abuses were closed in 2009 when the legislature unanimously passed and Governor Patrick signed the pension and transportation reform bills. The reforms ended the one-day rule, which had allowed retirees to include in pension calculations years in which they had worked just one day. It also closed the loophole that had allowed retirees to count years in which they were paid $5,000 or less (essentially, did volunteer work); placed limits on what counts as regular compensation (now excluding money received for travel, etc.); eliminated a loophole that had allowed unrestricted income while earning a pension through consultant work; stopped artificial inflation of pensions through the combining of pensions for those who had worked for more than one agency; eliminated a provision allowing elected officials with at least 20 years of service to collect special enhanced pensions when retiring early; and explanded the powers of the Special Commission on Pension Reform, created in 2008, which will examine additional avenues for reform including instituting a cap on benefits. (Read the Governor's press release for the bill here.) These measures were badly needed, but the work is not done! Massachusetts needs more reform.
Click here to see how YOUR legislator voted in 2009.
WHAT'S HAPPENING NOW
Governor Patrick filed legislation in January proposing new reforms for the state pension system. Here are some of the new reforms the Administration proposes:
- Changing the number of years of highest earnings used to calculate average earnings from three to five. Expanding the number of years used in calculations will reflect more accurately an employee’s average earnings.
- Raising retirement ages to reflect current working behaviors. As life spans increase, people work longer. This reform will widen the range of retirement slightly for each category of employees: for Group 1 (elected officials, most general employees), going from 55-65 to 60-67; for Group 2 (employees with hazardous jobs), going from 55-60 to 55-62; for Group 3 (state police), changing the minumum years of service to receive maximum benefits from 25 to 30; for Group 4 (firefighters, police officers, some corrections officers), going from 45-55 to 50-57.
- Reducing the contribution rates for new teachers, reflecting the reality that they will be contributing for more years.
- Pro-rating pensions for retirees who worked in more than one Group to more accurately reflect average earnings (rather than biasing calculations toward shorter but significantly higher-earning).
- Creating an “anti-spiking” rule that would limit sudden increases in pensionable earnings (excluding promotions).
- Ending the ability to earn a pension while being paid for service as an elected official.
- Eliminating early retirement benefits for those who are terminated before reaching retirement age.
- Eliminating early retirement incentives.
- Granting partner pension benefits to same-sex couples married in the first year it became legal to do so.
- Enabling retirement boards to request reimbursement of any pension benefits received after their conviction by retirees convicted of crimes related to their employment.
- Creating a commission to study the pension classification system.
Read the full text of the bill here.
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