CLT
UPDATE
Monday, October 6, 2003
State's profligate pension system
busting the budget
After enduring three years of its worst fiscal crisis since the Great Depression, the Commonwealth may face a $2 billion budget gap next year that could force another round of cuts in state services, according to a report to Democratic senators.
With Governor Mitt Romney still vowing to veto any tax increases, the likely deficit will force legislators to scrape for even more savings in a budget they have struggled mightily to pare down by cutting money for education, health care for the poor, and other programs....
"We're all in agreement that even though the number is less than the gap going in a year ago, it's going to be a more difficult year because the cuts will come on top of what has already taken place," said Michael J.
Widmer, president of the Massachusetts Taxpayers Foundation....
To close the budget gap this year, Romney and state lawmakers imposed what one report has estimated to be $500 million in fee increases, making it more expensive to get a marriage license or a divorce, file a court case, buy a house, or renew a driver's license....
Murray's forecast relies on conservative projections: It assumes a 12 percent increase in Medicaid spending, the national average, and 2 percent increase in revenue, rather than the 4 percent the Romney administration hopes for.
It assumes that the state's contribution to the pension fund will
double...
Now, however, some advocates are girding for the worst. Stephen E. Collins, executive director of the Massachusetts Human Services Coalition, said that after three years of cuts, his group is expecting some programs to be eliminated.
"Our basic concern is that we're going to see what has already happened at the Department of Public Health, the most heavily hit agency, spread to other human service agencies," said Collins, who noted that in recent years deficit projections have tended to get worse, not better, as the formal budget process gets underway. "There is no way that you're going to deal with a $2 billion deficit without more devastating cuts."
Collins's hope is that as residents begin to feel the impact of cuts in health care, education, and public safety, there will be an outcry for a tax increase....
The Boston Globe
Monday, October 6, 2003
Senate panel sees $2b deficit
Such are the quirks of the state's pension system, which critics claim is rife with inequities and abuse and in dire need of reform.
Calls for reforming the system have grown louder in recent weeks as retired University of Massachusetts President William Bulger is poised to receive the richest pension in state history -- nearly $200,000 per year.
But many government watchdogs believe some of the most glaring examples of inequity in the system are more subtle than a high-profile case like
Bulger's.
"We need to take a comprehensive look at this," said Barbara
Anderson, executive director of Citizens for Limited Taxation. "No state worker should be getting a $100,000 pension. It's just so much more generous than what the working people who pay for it can get for themselves." ...
But Anderson, of Citizens for Limited Taxation, said the state's pension system is more generous than anything the private sector has to offer.
"I don't think the public sector should be an elite class of people who receive benefits far beyond what other working people can get," she added....
"It's very commonly understood that if you're a good boy or girl, you can get a higher-paying job for three years to get your pension up," Anderson said.
The MetroWest Daily News
Sunday, October 5, 2003
State pension quirks bring cries for reform
The state bureaucracy is leaner this week following the departure last Tuesday of more than 2,000 workers who chose to accept retirement sweeteners that immediately trim the state's payroll while further increasing its long-term pension system liabilities....
Citing the expense of such programs, GOP Gov. Mitt Romney vetoed the early retirement program in the state budget sent him by lawmakers last summer but they overrode his objections and the offer was extended last month. Last Tuesday, hundreds of workers walked....
This is the third round of early retirement. During the first round, in 2002, about 4,600 workers retired and state pension system actuaries say it increased the state's long-term unfunded pension liability by $312 million.
State House News Service
Advances - Week of Oct. 6, 2003
Chip Ford's CLT
Commentary
How much longer will government's largesse be
extended to former government employees (remember when they used to
refer to themselves as "public servants"?) at taxpayer
expense? Even in "The Worst Fiscal Crisis Since the Great
Depression" the good times continue to roll for Beacon Hill's most
well-connected -- even at the expense of "the children" and
"most vulnerable among us."
This suddenly-popular "early release"
program is doing taxpayers nothing if those let loose need to be
replaced eventually anyway.
Again Michael Widmer, president of the so-called
Massachusetts Taxpayers Foundation, recognizes the problem and again he
pontificates upon it.
"It's a major issue. We've been cutting funding into the pension system at the same time the market has dropped precipitously," he said. "We're on a collision course. We have to reverse."
But then immediately, as usual, he runs his usual
political cover for the Beacon Hill elite:
"Individual abuses and extreme cases are the ones that tend to reach the public eye," Widmer said. "Underneath it, you have a lot of middle-income workers who are certainly entitled to legitimate pensions."
...
Widmer, however, doubts that anyone on Beacon Hill will be willing to change that part of the system.
"It's embedded in the political culture," he said. "The better course of action would be to look at the worst areas of abuse and excess and try to rein those in."
Just because "it's embedded in the political
culture" is no reason not to blow up one of the state's most
unjustifiable "budget busters" and start all over from
scratch.
Never mind that we have the 7th-highest state pension
debt in the nation, Widmer is attempting to again misdirect us into
tweaking the system around its meaningless edges until the crisis
explodes. Then he'll of course assert that there's simply no
alternative now but a tax increase on average taxpayers, or more
borrowing from his members' banks.
Blow it up now and start from scratch, or prepare for
a greater and greater drain on the public treasury year after year ...
and big tax increases to fund it sooner rather than later -- just to
keep "our commitment" to the quickly expanding legion of
retired "public employees." Count on that
"commitment" being kept whatever it takes from us toiling
serfs, because it's the only promise politicians believe in
keeping. They and their politically-wired friends are the primary
beneficiaries of the status quo.
"Where would you cut?"
Start right here, right now.
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Chip
Ford |
The Boston Globe
Monday, October 6, 2003
Senate panel sees $2b deficit
No respite likely from budget cuts
By Scott S. Greenberger, Globe Staff
After enduring three years of its worst fiscal crisis since the Great Depression, the Commonwealth may face a $2 billion budget gap next year that could force another round of cuts in state services, according to a report to Democratic senators.
With Governor Mitt Romney still vowing to veto any tax increases, the likely deficit will force legislators to scrape for even more savings in a budget they have struggled mightily to pare down by cutting money for education, health care for the poor, and other programs.
"We just warned all the members at the same time that we are not out of the woods," said Senator Therese Murray, a Plymouth Democrat who is chairwoman of the Ways and Means Committee. "We still have a structural deficit we have to address and we really can't add much to that deficit and expect to climb out of this recession any time soon."
It is still early in the budget process -- Romney will kick off the formal process when he submits his budget blueprint in January -- and the deficit number is likely to fluctuate. But Murray's analysis is the most detailed to date on the prospective gap, and its conclusions are being echoed by the Romney administration, House Speaker Thomas M. Finneran, and independent budget analysts.
"We're all in agreement that even though the number is less than the gap going in a year ago, it's going to be a more difficult year because the cuts will come on top of what has already taken place," said Michael J.
Widmer, president of the Massachusetts Taxpayers Foundation.
The shortfall state officials had to close in the current fiscal year was $3 billion, and for several months there have been rumblings on Beacon Hill that the deficit for the coming fiscal year would be large.
Finneran had been projecting a gap of between $1 billion and $1.5 billion, but last week he said he now envisions a final number of about $2 billion. The House Ways and Means Committee is working on its own analysis. The Romney administration, meanwhile, is predicting a deficit of between $1.5 billion and $2 billion, and it has already begun telling state agencies to begin planning for tighter budgets in the coming year.
To close the budget gap this year, Romney and state lawmakers imposed what one report has estimated to be $500 million in fee increases, making it more expensive to get a marriage license or a divorce, file a court case, buy a house, or renew a driver's license. Even with the fee increases, Romney and the lawmakers cut spending on K-12 education and health care spending for the poor, and other state services.
Romney has threatened more immediate cuts in programs ranging from housing to juvenile offenders to land-buying efforts. The Legislature is expected to take up bills to restore some of the social services money.
But when lawmakers turn to next year's budget, a Romney spokeswoman emphasized that once again broad-based taxes are off the table.
"We don't want to raise taxes -- definitely not," said Nicole St. Peter, a spokeswoman for Romney. "Raising taxes only hurts the working people of Massachusetts, and also cuts jobs."
Murray's forecast relies on conservative projections: It assumes a 12 percent increase in Medicaid spending, the national average, and 2 percent increase in revenue, rather than the 4 percent the Romney administration hopes for. It assumes that the state's contribution to the pension fund will double, and that overall spending will increase 2 percent, conforming with the expected rise in the consumer price index.
Widmer said Murray's analysis is overly pessimistic in at least one respect: It doesn't account for the federal government's contributions to the Commonwealth's Medicaid program, which would knock about $400 million off Murray's $2 billion figure.
The disclosure last month that the state had quietly built up $726 million in its main reserve account -- twice the estimate that circulated during last year's budget debate -- raised hopes that the state could restore some services.
"Before I did the presentation to the members, I had already received $102 million in requests," Murray said, referring to the reaction to the rosy reserve numbers.
Now, however, some advocates are girding for the worst. Stephen E. Collins, executive director of the Massachusetts Human Services Coalition, said that after three years of cuts, his group is expecting some programs to be eliminated.
"Our basic concern is that we're going to see what has already happened at the Department of Public Health, the most heavily hit agency, spread to other human service agencies," said Collins, who noted that in recent years deficit projections have tended to get worse, not better, as the formal budget process gets underway. "There is no way that you're going to deal with a $2 billion deficit without more devastating cuts."
Collins's hope is that as residents begin to feel the impact of cuts in health care, education, and public safety, there will be an outcry for a tax increase. So far, legislators on Beacon Hill say they have yet to feel the pressure from outraged constituents.
"Once people realize just how far and deep these cuts have already gone, there will be less of a stomach for deep cuts in 2005," Collins said.
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The MetroWest Daily News
Sunday, October 5, 2003
State pension quirks bring cries for reform
By Michael Kunzelman, Staff Writer
Herbert Wilkins, a former chief justice of the state's highest court, retired in 1999 after a long, distinguished career on the bench. Judge Peter Donovan of Framingham retired a year later, shortly before he was publicly reprimanded for misconduct stemming from a fender-bender.
Which judge received a higher pension from the state?
Donovan did, even though he had earned a lower salary, served a shorter tenure and retired at an earlier age than Wilkins, a Concord resident who left the Supreme Judicial Court when he reached the mandatory retirement age of 70 for judges.
Such are the quirks of the state's pension system, which critics claim is rife with inequities and abuse and in dire need of reform.
Calls for reforming the system have grown louder in recent weeks as retired University of Massachusetts President William Bulger is poised to receive the richest pension in state history -- nearly $200,000 per year.
But many government watchdogs believe some of the most glaring examples of inequity in the system are more subtle than a high-profile case like
Bulger's.
"We need to take a comprehensive look at this," said Barbara
Anderson, executive director of Citizens for Limited Taxation. "No state worker should be getting a $100,000 pension. It's just so much more generous than what the working people who pay for it can get for themselves."
Donovan's pension award illustrates one way in which state employees aren't treated equally when it comes to collecting a pension.
Donovan, who served 18 years on the bench before he left Boston Municipal Court at age 60, receives an annual $79,680 "mental health" disability pension from the state.
Of 2,948 retired state employees who currently live in MetroWest, only 20 retirees receive a higher pension than Donovan, according to records obtained from the state treasurer's office.
Long before he retired, Donovan was charged with drunken driving following a February 1993 traffic collision in Framingham.
Although a judge acquitted Donovan of drunken driving in 1996, the Commission on Judicial Commission concluded he used "inappropriate and offensive language" to the driver whose car he struck and mentioned his position as a judge to the police officers investigating the crash.
A psychiatrist reportedly told the commission that Donovan has been mentally ill since March 1997, suffered from "obsessive and compulsive symptoms" and was being treated with psychotropic drugs.
In 2000, then-Gov. Paul Cellucci and the Governor's Council awarded Donovan a disability pension that allowed him to collect 75 percent of his highest three-year average annual salary, which was $105,281.
Had Donovan received a normal "superannuation" pension, he only would have been entitled to collect 45 percent of his average annual salary, according to the state retirement board.
In other words, Donovan collects approximately $31,000 more every year from a disability pension than a normal pension would give him.
Unlike other state employees, however, Donovan didn't have to submit to a rigorous screening process to qualify for a disability pension.
The state Constitution gives the governor and the Governor's Council the discretion to retire any judge because of "advanced age or mental or physical disability."
Meanwhile, all other state employees must have their applications for a disability pensions reviewed by the Public Employee Retirement Administration Commission. PERAC has a panel of three physicians review each application and decide whether the disability pension is warranted.
Often, the panel rejects the request. Last year, for instance, the commission rejected 785 of 1,464 applications for disability pensions.
"It's a fairly exhaustive process," said Kevin Blanchette, PERAC's deputy executive director. "We have assembled a cadre of physicians who exercise sound, qualified and independent judgment."
Governor's Councilor Mary Ellen Manning, D-Peabody, said Donovan wouldn't be the first judge to exploit this "loophole" in the disability pension system.
Last year, Manning objected when her colleagues on the Governor's Council awarded an annual $85,000 disability pension to Associate Juvenile Court Justice June Miles, whose doctors said she suffered post-traumatic stress disorder from hearing child abuse cases.
Manning said Miles would have received a pension of only $50,000 annually if she had simply applied for early retirement. Manning said she couldn't recall how she voted on Donovan's pension application, which was early in her tenure on the council.
"They're doing an end run around the pension disability system that is in place for everybody else who works for the state," she said. "They have perverted what was supposed to be a very narrow exception to the disability system for their own financial benefit."
Manning said the system also works to the benefit of governors because it makes it easier for them to create new vacancies for judgeships, which are a lucrative source of campaign cash from would-be jurists.
"It's not even a legitimate loophole, but it's one that has been allowed to remain in place," she added.
Wilkins, for his part, was eligible for a 20-percent higher pension, but he opted for a pension plan that would award his wife a lifetime survivor allowance. Donovan, on the other hand, receives his full retirement allowance.
Still, Wilkins said he finds it "somewhat strange" that a judge who had a significantly lower average salary with eight fewer years of service and less seniority would earn a higher pension than he receives.
"On the other hand," Wilkins added, "I'm not complaining because I didn't have to make any contributions (to the pension system) and I believe Peter Donovan did."
Wilkins and Donovan both received lucrative retirement packages, but neither cracks the list of top 20 highest pensions awarded to residents of
MetroWest.
At the top of the list is Dr. Gerald Steinberg, who retired last year as vice chairman of UMass Medical School's department of orthopedic surgery and physical rehabilitation.
Steinberg, who worked for the state for 24 years, retired at age 58 and had a three-year annual average salary of $330,992, collects an annual pension of $187,508.
Statewide, only Dr. Arthur Pappas, who chaired the orthopedics department at UMass Medical School and was a former team doctor for the Boston Red Sox, currently earns a higher pension than Steinberg.
Several other retired UMass Medical School doctors who live in the western suburbs also collect some of the richest pensions in the state system.
Dr. Nancy Eckhert of Wayland, who chaired the school's Department of Family Medicine, receives $128,624 annually. Michael Bratt of Wayland, who was a provost and professor of molecular genetics and microbiology, has an annual pension of $127,936. David Drachman of Concord, who was a neurology professor, collects $118,657 annually.
UMass Medical School doctors always dominate the list of highest state pensions, said Michael
Widmer, president of the Massachusetts Taxpayers Foundation.
"The salary structure for (doctors) is high, much higher than the average state worker," Widmer said.
UMass Medical School spokesman Michael Cohen said the state must pay its doctors higher salaries and offer generous benefits to remain competitive with other medical schools.
"We pay competitive wages for highly skilled people," he said. "The pension system is what it is. The same rules apply to us as to every other state entity."
Meanwhile, the average retired state worker receives an annual pension of $18,277, according to the retirement board.
"Individual abuses and extreme cases are the ones that tend to reach the public eye," Widmer said. "Underneath it, you have a lot of middle-income workers who are certainly entitled to legitimate pensions."
But Anderson, of Citizens for Limited Taxation, said the state's pension system is more generous than anything the private sector has to offer.
"I don't think the public sector should be an elite class of people who receive benefits far beyond what other working people can get," she added.
In the wake of Bulger's retirement, Gov. Mitt Romney has vowed to push for certain pension reforms, such as a cap on the maximum pension amount allowed by the state.
Romney spokeswoman Nicole St. Peter said the governor plans to unveil a detailed list of pension reform proposals in his fiscal year 2005 budget.
"The governor believes that the current pension system is designed by insiders for insiders," St. Peter said. "He wants to change the current system and make it more equitable and fair for all state employees."
Massachusetts' pension system isn't vastly different than other states, however.
Sixty-eight of the 100 largest public pension systems, including Massachusetts, calculate a worker's pension based on their average salary over three years, while 16 states use the highest five years and eight use the highest four years, according to the National Conference of State Legislatures.
Some critics claim the three-year system is ripe for abuse.
"It's very commonly understood that if you're a good boy or girl, you can get a higher-paying job for three years to get your pension up," Anderson said.
Widmer, however, doubts that anyone on Beacon Hill will be willing to change that part of the system.
"It's embedded in the political culture," he said. "The better course of action would be to look at the worst areas of abuse and excess and try to rein those in."
A total of 85,000 retirees are drawing from the state's $28 billion pension fund. Like many other states, Massachusetts' pension fund debt is growing, from $7.5 billion last year to $12.5 billion this year, according to a published report.
That's more than half the size of the state budget, Widmer noted.
"It's a major issue. We've been cutting funding into the pension system at the same time the market has dropped precipitously," he said. "We're on a collision course. We have to reverse."
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State House News Service
Advances - Week of Oct. 6, 2003
[Excerpt]
The state bureaucracy is leaner this week following the departure last Tuesday of more than 2,000 workers who chose to accept retirement sweeteners that immediately trim the state's payroll while further increasing its long-term pension system liabilities.
The offer of enhanced benefits is a device used in both the public and private sectors to trim staff while minimizing layoffs.
Citing the expense of such programs, GOP Gov. Mitt Romney vetoed the early retirement program in the state budget sent him by lawmakers last summer but they overrode his objections and the offer was extended last month. Last Tuesday, hundreds of workers walked.
Human Service agencies were particularly hard hit. Taking their leave last week from the Department of Transitional Assistance were 186 employees. Leaving the Department of Social Services were 118, and the rolls of the Department of Public Health are now down 59 workers. Hundreds more left jobs in the departments of Mental Health and Mental Retardation, the Department of Revenue lost 90 people and the courts lost 213 more. No one has a real handle on how this exodus of veteran employees will affect the delivery of government services.
There's no hiring freeze in place for executive branch agencies and the law allows for the backfill, or hiring of replacement staffers, at a cost of up to 20 percent of the annualized salaries of those who retired. To be refilled, positions must be deemed vital to public health or safety or critical for essential operations.
This is the third round of early retirement. During the first round, in 2002, about 4,600 workers retired and state pension system actuaries say it increased the state's long-term unfunded pension liability by $312 million.
Early retirement, rather than layoffs, has been the state's preferred method of workforce reduction during this prolonged economic slump. Records show 65,825 workers on the state payroll in June 2003, down from a peak of 70,527 in June 2000.
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