CLT
UPDATE
Monday, June 12, 2006
The ticking time bomb -- Part II
When Charles B. Lincoln retired three years ago, he
walked away with what is now a $140,000 annual pension after juggling
two law enforcement jobs — one by day, the other by night.
But the state inspector general says the price tag to taxpayers was even
higher in lost work time and extra vacation benefits.
And it could happen again, officials say.
"It's a systematic problem," said Barbara Anderson, executive
director of Citizens for Limited Taxation. "The whole system
works together to defraud the taxpayers." ...
But the system is "fundamentally flawed," rewarding employees
arbitrarily and allowing lawmakers to push costs onto taxpayers,
according to a
recent report
by the Pioneer Institute for Public Policy Research, a Boston think
tank.
The Brockton Enterprise
Saturday, June 3, 2005
Repeat of Lincoln pension fiasco possible
Come on, be serious. Was there anyone who
didn't think Charlie Lincoln was putting one over on the people of Brockton and
Plymouth County when he supposedly was "working" two full-time jobs? Everyone
knew it was a scam perpetrated by Lincoln and his patron, ex-Sheriff Joseph
McDonough, so Lincoln could collect the largest pension in county history —
$140,000 per year....
It won't be easy to kill off Lincoln's pensions — look at how tenaciously the
other pension pirate, William Bulger, is fighting to keep every last dime he
thinks he is owed.
A Brockton Enterprise editorial
Monday, June 5, 2005
Lincoln pension scheme really isn't so shocking
Every cause needs a champion. Now Charles Bradshaw Lincoln
has emerged as the new face of the need to reform Massachusetts' wasteful public
pension system.
Last month the Pioneer Institute, the market-oriented think tank,
published a detailed
examination of how abuse and inefficiency are costing taxpayers billions.
The report, written by Ken Ardon, who teaches economics at Salem State College,
found a system that is "riddled with exceptions, ambiguities, and loopholes"
that allow some employees to game the system, requiring an additional $125
million in annual taxpayer funding. Ardon attributed $3 billion of the state's
$13 billion in unfunded pension liabilities to such abuse....
The pension system is the way it is because those who oversee it -- the cops and
firefighters who run the retirement boards -- have it just the way they like it.
As the inspector general notes, Lincoln was no accident....
Charlie Lincoln is how a state with 106 separate pension systems is spending
your tax money.
The Boston Globe
Wednesday, June 7, 2006
Putting a face on the need to reform
By Steve Bailey
Larry Driscoll, retired Tewksbury firefighter and longtime
trustee for the scandal-scarred and underperforming Middlesex County Retirement
System, was here this week with hundreds of other trustees for the annual spring
fling of the state's local pension boards. At pig fests like these, no trustee
ever need be lonely: With a small army of reps from name-brand money management
firms everywhere, there is a friend, with a credit card, for everyone.
In February, Driscoll and the entire Middlesex board were in Key West, Fla., for
their annual winter retreat, "the Fire & Police Academy," an investment
conference run by Driscoll's daughter and ex-wife. In between Key West and
Hyannis, Driscoll squeezed in at least one more trip: a junket to Cambodia and
Vietnam in search of investment opportunities....
Over 10- and 20-year periods, only six of 104 local pension funds outperformed
the state pension fund, Pioneer found. That underperformance amounted to $1.6
billion over a decade, Pioneer said. Lieutenant Governor Kerry Healey this week
endorsed Pioneer's approach....
According to the Pioneer Institute, Middlesex's retirement system, one of the
state's 10 worst-performing pension systems, would have had $158 million more
over the last decade by putting its money in the state's top-performing pension
system. Multiply that by 104 independent pension systems and you are talking
real money.
The Boston Globe
Friday, June 9, 2006
Agents of change
By Steve Bailey
Lieutenant Governor Kerry Healey today plans to propose a
sweeping overhaul of the state's fragmented public pension system that would
eliminate traditional pensions for most new public-sector workers and instead
give them corporate-style saving accounts like 401(k) plans.
Healey's proposal would also eliminate Massachusetts' 104 independent public
pension systems -- each of which makes its own investment and budget decisions
-- and put their money in the state pension trust, which has performed far
better than the generally smaller, less professional plans.
Together the steps would eventually produce more than $350 million in investment
gains and administrative savings annually, according to an outline of Healey's
plan obtained by the Globe....
Healey's proposal dovetails with
a recent report by
the Pioneer Institute, a Boston think tank that traditionally favors
market-oriented policies. Pioneer found only six of the 104 systems performed
better than PRIT in the past 20 years. Over the past 10 years, the
underperformance effectively cost retirees $1.6 billion compared to what they
would have earned if their pension assets were invested with the state, the
report found.
Pioneer has also cited a lack of oversight at many of the local pension boards,
including a state inspector general's report this year that criticized practices
at the Middlesex County pension system as a profound breach of public trust and
a misuse of beneficiaries money." ...
Healey's plan would require most new public-sector workers to contribute at
least 9 percent of their pretax pay into accounts, up to a maximum of $15,000 a
year. (New police and firefighters would be exempt from this part of Healey's
proposal and would still have traditional pensions, however.)
Individuals could either open their own IRA-style accounts or put the money in
new accounts managed by the state's PRIT. The state would match a portion of
those contributions. Workers who fear wild market swings could invest in
accounts tied to safer 10-year treasury bonds instead.
The Boston Globe
Tuesday, June 7, 2006
Healey to propose state pension overhaul
New hires would get 401(k)-style plans
instead of traditional ones
There is a time bomb quietly ticking away in the
netherlands of state and local government, and it is set to blow up in
the next few years. When it detonates, the damage will easily run into
the hundreds of billions of dollars —- forcing tax hikes and public
service cuts that will affect the lives of millions of Americans unless
dramatic action is taken soon. Why? Because, unlike the private sector,
the majority of government employers -- 48 out of 50 states and more
than half of all municipalities -- still provide health-care benefits
for their workers after retirement. The problem is, lawmakers haven't
bothered to set aside nearly enough money to pay for these contractually
guaranteed benefits. With health-care costs soaring and the rolls of
public workers at retirement age growing fast, the tab for these
obligations is expanding exponentially. And the bill is now coming
due....
Compounding the problem is the fact that public-sector workers are
typically eligible to retire with full pension and health benefits at a
much younger age (often in their mid-50s) than their private-sector
counterparts.
-- Fortune Magazine
CLT Update
Apr. 24, 2005
The secret
ticking time bomb:
"public service" pensions, health insurance giveaways
Chip Ford's CLT Commentary
When will citizens wake up, recognize that the
freight train long ago left the station and is bearing down on them, on
their children, and on their grand kids?
I'd ask the same question of legislators -- but so
long as they keep getting themselves reelected, they have no reason to
deal with it, no motivation whatsoever. They'll be retired too by
the time the bill comes due for us taxpayers to pay; they're not about
to sidetrack their gravy train as it rolls comfortably down the tracks.
While many today are suddenly waking up to the
taxpayers' liability for unfunded and mismanaged public employee
pensions -- due to a single absurd abuse, though Billy's Bulger's alone
should have been enough -- nobody appears to recognize the even worse
taxpayer liability just over the horizon: the equal if not greater
burden of retired public employees' contracted health-insurance costs,
both state and municipal.
As I wrote over a year ago in my
CLT Commentary of April 24, 2005:
The "public service" gravy train is soon to utterly
bury us, especially the younger generations coming up who'll have to
pay the staggering bill for government first and foremost taking care
of itself as usual....
When Social Security hits the wall, as increasing Medicare and state
Medicaid costs continue plodding uphill like a juggernaut while the
Legislature keeps expanding and creating new ways to spend our money
-- when inevitable "tough choices" are finally unavoidable -- you can
bet your last dollar, literally, that the last thing to go will be the
platinum entitlements of public employees and their union hangers-on,
paid for by taxpayers.
They are covered by bargained contracts. We are covered by only vague
political "promises."
And we all know how politicians feel about promises -- especially when
the "tough choice" comes down to them or us.
It's not a question of "if" -- it's merely a question
of "when." And when isn't very far over the horizon any longer.
--
Read the Pioneer Institute's report --
-- Read
the state Office of the Inspector General's report
--
 |
|
Chip Ford |
The Brockton Enterprise
Saturday, June 3, 2005
Repeat of Lincoln pension fiasco possible
By Maureen Boyle, staff writer
When Charles B. Lincoln retired three years ago, he walked away with
what is now a $140,000 annual pension after juggling two law enforcement
jobs — one by day, the other by night.
But the state inspector general says the price tag to taxpayers was even
higher in lost work time and extra vacation benefits.
And it could happen again, officials say.
"It's a systematic problem," said Barbara Anderson, executive
director of Citizens for Limited Taxation. "The whole system
works together to defraud the taxpayers."
Lincoln was able to combine the income of his two jobs — one as a
Brockton police lieutenant, the other as director of security at the
Plymouth County jail — to boost his income for pension purposes.
Then he called in sick 251 days over the three years he held the dual
posts, the state inspector report indicates.
Lincoln called in sick 148 of those times as a Brockton cop only to work
those same days as the director of security at the Plymouth County jail.
Inspector General Gregory W. Sullivan called the Lincoln case "one of
the most significant abuses" of public money in the state.
Attempts to reach Lincoln, of Middleboro, for comment Friday were
unsuccessful.
In earlier interviews, Lincoln said he saved the city money by using up
his sick days rather than selling them back to the city as allowed in
the union contract.
The fault isn't with the pension system, some said, but with those who
were watching over Lincoln and his work.
"Taking sick days in one job while working another is, I consider, an
extreme abuse but one that should have been immediately dealt with at
the time," state Rep. James Fagan, D-Taunton, said. "The problem is not
the pension system ... The problem is with looking-the-other-way
supervisors and what may have been a collusion of parties to allow this
type of situation to occur."
Current Plymouth County Sheriff Joseph D. McDonald Jr. said similar
situations have happened elsewhere in the state — and likely will occur
again if a closer watch isn't kept.
"The problem here is that the next guy that tries to do this may be just
a little bit smarter and won't get caught," McDonald said.
High pensions such as Lincoln's are not the norm — only two retirees in
2005 qualified for $100,000-plus pensions.
But the system is "fundamentally flawed," rewarding employees
arbitrarily and allowing lawmakers to push costs onto taxpayers,
according to a
recent report
by the Pioneer Institute for Public Policy Research, a Boston think
tank.
That translates into a need for reform, said state Rep. David L. Flynn,
D-Bridgewater. "Something like this calls attention to the issue," he
said.
State Rep. Vinny deMacedo, R-Plymouth, said he expects changes to be
made — and soon.
"When people see how it is possible to abuse the system, it will be
addressed. For the integrity of the system, this is an issue that will
be addressed," he said.
State Sen. Marc Pacheco, D-Taunton, said pension issues are not new —
hundreds of bills have been filed on it. "We are looking at these issues
all the time," he said.
Changing an intricate pension system can be tricky, Pacheco said. "It is
a very complex system. It is like a Rubik's Cube the way it is all set
up," Pacheco said.
That system, for example, allows the service of part-time, elected
officials to be counted as full-year service when it comes to
calculating pensions, several said.
That means a selectman or city councilor could rack up years of service
part time — then get a high-paying, full-time government job for three
years before retiring and get a full pension based on the last three
years of service.
"It's the best perk in America," said William Parlow, a member of the
Brockton Retirement Board.
"If you are a part-time librarian for 30 years, your part-time work only
counts for part time. If you are an elected official, your time counts
full time ... It is another inequity of the system," he said.
There were no allegations that the former cop did anything illegal.
Plymouth County District Attorney Timothy J. Cruz said the report
highlights the need for changes in the law, rather than a criminal
probe.
"At this point, we haven't begun any additional investigation to what
the IG has done," Cruz said.
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The Brockton Enterprise
Monday, June 5, 2005
A Brockton Enterprise editorial
Lincoln pension scheme really isn't so shocking
Come on, be serious. Was there anyone who didn't think Charlie Lincoln
was putting one over on the people of Brockton and Plymouth County when
he supposedly was "working" two full-time jobs? Everyone knew it was a
scam perpetrated by Lincoln and his patron, ex-Sheriff Joseph McDonough,
so Lincoln could collect the largest pension in county history —
$140,000 per year.
The good news is that Lincoln's party may be over. State Inspector
General Gregory Sullivan issued a report last week that confirmed what
most people knew — Lincoln used his political connections to get a job
in the sheriff's department and abused his sick time so he could "work"
two jobs and line up his exorbitant pension.
The Sullivan report spares no rhetoric, calling Lincoln a "master
manipulator" and said his sick-time policy was "one of the most
significant abuses" of taxpayers in state history. The sick time abuse
was "shocking and alarming," Sullivan wrote — and on and on. You get the
picture.
One of the few good pieces of news to come out of this farce was that it
helped cost McDonough the election in 2003. But few people knew the
extent to which McDonough enabled his buddy Lincoln — a top campaign
aide — to abuse the system. Lincoln, a Brockton police lieutenant,
called in sick 222 days in the time leading up to his 2004 retirement,
causing thousands of dollars of overtime for Brockton taxpayers. Yet, on
148 of those days, he went to work at the sheriff's office. The sick
time abuse got so bad that then-Police Chief Paul Studenski gave Lincoln
both verbal and written warnings.
What was McDonough's take on the matter? "He showed up, he worked and he
was an excellent employee."
Good grief!
We think McDonough's successor as sheriff, Joseph McDonald, had a more
apt description of Lincoln's scheme: "This thing would stink at a skunk
convention."
It won't be easy to kill off Lincoln's pensions — look at how
tenaciously the other pension pirate, William Bulger, is fighting to
keep every last dime he thinks he is owed. But the good news for
taxpayers is that all the evidence is out in the open and people finally
have in black and white what they suspected all along — that Charlie
Lincoln was manipulating the system for his own financial benefit.
Return to top
The Boston Globe
Wednesday, June 7, 2006
Putting a face on the need to reform
By Steve Bailey, Globe Business Columnist
Every cause needs a champion. Now Charles Bradshaw Lincoln has emerged
as the new face of the need to reform Massachusetts' wasteful public
pension system.
Last month the Pioneer Institute, the market-oriented think tank,
published a
detailed examination of how abuse and inefficiency are costing
taxpayers billions. The report, written by Ken Ardon, who teaches
economics at Salem State College, found a system that is "riddled with
exceptions, ambiguities, and loopholes" that allow some employees to
game the system, requiring an additional $125 million in annual taxpayer
funding. Ardon attributed $3 billion of the state's $13 billion in
unfunded pension liabilities to such abuse.
As good as the Pioneer report is, the story of Charlie Lincoln, lifetime
Brockton cop, tells it better. Lincoln -- as the state inspector general
calls him in his own scathing new report -- is "a master manipulator."
You almost have to admire the guy's genius in playing the system -- if
we weren't picking up the bill.
That bill comes in the form of a lifetime pension of nearly $140,000 a
year -- or $11,648.9 2 a month. That is an extraordinary payday for a
retired a cop -- 55 percent higher than any pension ever paid in
Plymouth County -- but the most stunning part is how Lincoln allegedly
"earned" that pension. The inspector general, Gregory Sullivan, calls it
"one of the most significant abuses in the expenditure of public funds
and abuse of employment benefits in the history of the Commonwealth."
According to Sullivan, Lincoln fattened his pension by working two jobs
at once -- as a Brockton police lieutenant and director of security at
the Plymouth County Sheriff's Office -- for three years before he
retired in 2004. Just a hard-working guy, you say? Try again. Lincoln is
a hack's hack, the Barry Bonds of the Hack Hall of Fame. Two words: sick
leave.
In the three years that Lincoln worked the day shift at the Plymouth
jail and the night shift as a Brockton cop, he called in sick 251 days,
the inspector general says. Repeat: 251 days. On 148 days he took sick
leave from Brockton, he worked a full shift in Plymouth. On his last
year on the "job" in Brockton, Lincoln worked only 60 full days and 14
partial days out of a possible 243 work days, the inspector general
found.
For his three years of "service" to Plymouth County, those taxpayers
will pay Lincoln $62,696.63 a year FOR LIFE. Brockton taxpayers will pay
$76,553.81. Dedham will kick in $536.64.
The pension system was no match for this cop. Lincoln boosted his
pension by combining his salaries at Brockton and Plymouth. He more than
doubled his Plymouth vacation time by piggybacking on his years in
Brockton. He used up all his sick days in Brockton because he knew he
couldn't get paid for them when he quit. And finally, the inspector
general says, Lincoln retired from Plymouth rather than Brockton because
it would lower his expenses for retiree health insurance.
Not that he needs the dough, but Lincoln could clean up with a
late-night infomercial on how to hustle your local pension system.
The pension system is the way it is because those who oversee it -- the
cops and firefighters who run the retirement boards -- have it just the
way they like it. As the inspector general notes, Lincoln was no
accident. Former Plymouth County Sheriff Joseph McDonough, who hired
Lincoln for this three-year victory lap at the jail, knew how the system
worked. He is on the Plymouth County retirement board. Lincoln, not
coincidentally, helped on McDonough's campaign in 2000.
"Sheriff McDonough apparently decided to reward Lincoln for his campaign
assistance at the expense of the taxpayers," Inspector General Sullivan
wrote.
Neither Lincoln nor McDonough returned my calls.
Charlie Lincoln is how a state with 106 separate pension systems is
spending your tax money. On Friday I'll tell you about the cowboys who
are investing your tax money.
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The Boston Globe
Friday, June 9, 2006
Agents of change
By Steve Bailey, Globe Business Columnist
Larry Driscoll, retired Tewksbury firefighter and longtime trustee for
the scandal-scarred and underperforming Middlesex County Retirement
System, was here this week with hundreds of other trustees for the
annual spring fling of the state's local pension boards. At pig fests
like these, no trustee ever need be lonely: With a small army of reps
from name-brand money management firms everywhere, there is a friend,
with a credit card, for everyone.
In February, Driscoll and the entire Middlesex board were in Key West,
Fla., for their annual winter retreat, "the Fire & Police Academy," an
investment conference run by Driscoll's daughter and ex-wife. In between
Key West and Hyannis, Driscoll squeezed in at least one more trip: a
junket to Cambodia and Vietnam in search of investment opportunities.
Cambodia is not a place where most pension trustees look to put
retirees' money. Twenty-seven years after 1.7 million people, a quarter
of the country's population, perished under the Khmer Rouge, Cambodia
remains one of the world's poorest and most battered countries.
Seventy-five percent of the population is engaged in subsistence
farming. In January, after the latest arrest of the political
opposition, a New York Times editorial called Prime Minister Hun Sen a
man "intent on extinguishing what liberty remains."
A month later, however, Driscoll and a handful of other big-city pension
trustees -- mostly his pals from the annual Key West escape -- arrived
in Phnom Penh, according to the US consulate's office there and an
outline of their visit. They met with the US ambassador, Joseph
Mussomeli, a spokesman says, and got the VIP treatment from the
Cambodian government, including getting ferried around in a helicopter,
according to two investment advisers informed of the trip.
"This delegation consists of investors and public pension system
trustees researching investment opportunities in Cambodia," according to
the outline. "With $200 billion in investment assets, the group
represents over 23 public pension systems and two investment firms. . .
. The primary objective of the pension systems would be to secure
exposure to quality investments, and potentially facilitate US industry
while augmenting their current lackluster domestic US investment
returns."
The delegation, which also visited Vietnam, was led by an investment
consultant with a checkered past, Frank Chinn. If the name doesn't ring
a bell, Wedtech might. Ronald Reagan's attorney general, Edwin Meese,
was forced to resign over Wedtech Corp., a company at the center of a
long-running defense contracting scandal. Chinn, Meese's investment
adviser, was convicted of racketeering and conspiracy in 1989, though
the conviction was later overturned. Chinn, who splits his time between
San Francisco and Vietnam, did not return my calls or e-mail.
In a tough profile of Chinn, Business Week once asked: "Would you pick
this man to manage your money?"
For Middlesex, one of the state's largest public pension funds, with
$633 million in assets, the answer is yes. Six years ago Middlesex
fought a pitched, losing battle with state regulators to invest in a
start-up Vietnam real estate fund marketed by Chinn's Indochina
Consultants Ltd., the same company that put together the recent trip to
Cambodia and Vietnam. Driscoll, a Vietnam veteran, led the charge. In a
letter to state officials at the time, Driscoll said Middlesex "should
be allowed to pursue its fiduciary duty to invest in Vietnam for the
greater good of us all."
Today Driscoll, a retired firefighter who is now a stockbroker, is
looking again in Asia. In a brief interview in the lobby of the Hyannis
Sheraton on Tuesday, Driscoll called Chinn "a good friend." As for
investing in Cambodia, Driscoll says: "I think it is a good idea." He
says Middlesex did not pay for his recent Asian trip.
Thomas Gibson, Middlesex's chairman, said the retirement system had
nothing to do with Driscoll's trip. "We are not looking to invest in
Cambodia," he said.
Good idea, under the circumstances. In the past three years Middlesex
has become Exhibit A of why Massachusetts does not need 106 separate
pension funds. In 2003, for instance, the system lost $37 million, or 7
percent of its value, betting the wrong way in the currency markets. In
April, the state inspector general charged that the Middlesex board
rigged bids for the reconstruction of its headquarters in favor of a
contractor friendly with board members.
Middlesex has sued its record keeper in the currency loss, and says the
bidding process saved money in the headquarters construction. But a
state regulator, the Public Employee Retirement Administration, has
started a process that could result in the removal of the entire board.
Last month the Pioneer Institute, a market-oriented Boston think tank,
proposed consolidating the local pension funds into a single pension
fund, managed by the state. Centralizing the investment process, Pioneer
said, would take advantage of the state pension fund's superior
investment results, reduce costs, and improve oversight. Over 10- and
20-year periods, only six of 104 local pension funds outperformed the
state pension fund, Pioneer found. That underperformance amounted to
$1.6 billion over a decade, Pioneer said. Lieutenant Governor Kerry
Healey this week endorsed Pioneer's approach.
On Wednesday, I told you about Charles Lincoln, a retired Brockton cop,
who managed to game the system and walk away with a $140,000-a-year
pension for life. Lincoln is a stark example of how our wasteful and
fragmented public system is spending taxpayers and retirees' money.
Larry Driscoll is a stark example of who is investing that same money.
Our local pension boards, which oversee $15 billion, are run by too many
firehouse investors gambling with other people's money. Driscoll's name
has a way of coming up over and over. PERAC, the regulator, questioned a
Middlesex-paid trip he made to Australia to scout out investments and
his trips to the Key West conference run by his family. The inspector
general charged that Driscoll was instrumental in having his friend
hired to renovate the headquarters. A recent audit challenged Driscoll's
reimbursements for meals and travel.
To borrow a headline from Business Week: Would you pick this man to
manage your money?
The answer matters a lot. According to the Pioneer Institute,
Middlesex's retirement system, one of the state's 10 worst-performing
pension systems, would have had $158 million more over the last decade
by putting its money in the state's top-performing pension system.
Multiply that by 104 independent pension systems and you are talking
real money.
Return to top
The Boston Globe
Tuesday, June 7, 2006
Healey to propose state pension overhaul
New hires would get 401(k)-style plans
instead of traditional ones
By Ross Kerber, Globe Staff
Lieutenant Governor Kerry Healey today plans to propose a sweeping
overhaul of the state's fragmented public pension system that would
eliminate traditional pensions for most new public-sector workers and
instead give them corporate-style saving accounts like 401(k) plans.
Healey's proposal would also eliminate Massachusetts' 104 independent
public pension systems -- each of which makes its own investment and
budget decisions -- and put their money in the state pension trust,
which has performed far better than the generally smaller, less
professional plans.
Together the steps would eventually produce more than $350 million in
investment gains and administrative savings annually, according to an
outline of Healey's plan obtained by the Globe. The changes would
provide Massachusetts with more stable finances," according to the
outline, and would help attract young, talented individuals" turned off
by the current system.
The proposals by Healey, a Republican, could be used in her run for
governor in an appeal to voters unhappy with the cost of government. But
it could also draw a firestorm of protest from local pension officials
and Democrats on Beacon Hill aligned with public-sector labor unions who
favor the status quo.
The potential loss of an old-fashioned pension plan is also sure to
raise the same objections among many government workers that it has with
employees in the corporate world. Many people prefer the security of a
guaranteed pension payout and worry about tying their retirement to the
ups and downs of the financial markets. An increasing number of
companies, such as TJX Cos. and Verizon Communications Inc., are backing
away from traditional retirement benefits because of their uncertain
future costs.
A Healey campaign adviser, speaking on condition of anonymity because
the proposed overhaul has not yet been officially disclosed, said, as
governor, Healey would make the changes one of the first pieces of
legislation she would send to Beacon Hill, where they would need to be
approved by the Legislature. Governor Mitt Romney had talked of similar
changes to new worker pensions in the past, but had not proposed
specifics.
Another tenet of her plan is to centralize control of the numerous
government pension plans around the state -- ranging from the City of
Boston's plan with 34,000 employees and retirees to the Blue Hills
Vocational District's plan, with fewer than 100 people -- into the
Pension Reserves Investment Trust, which includes the pensions of
teachers and most state workers. The trust, known as PRIT, has about $35
billion of assets and returned about 11.59 percent a year on average
during the past decade.
Healey's proposal dovetails with a recent report by the Pioneer
Institute, a Boston think tank that traditionally favors market-oriented
policies. Pioneer found only six of the 104 systems performed better
than PRIT in the past 20 years. Over the past 10 years, the
underperformance effectively cost retirees $1.6 billion compared to what
they would have earned if their pension assets were invested with the
state, the report found.
Pioneer has also cited a lack of oversight at many of the local pension
boards, including a state inspector general's report this year that
criticized practices at the Middlesex County pension system as a
profound breach of public trust and a misuse of beneficiaries money."
Middlesex Retirement System officials dispute those findings in pending
litigation.
Others also have been calling for stricter oversight of the smaller
pension agencies, including a review board last year chaired by former
state attorney general Scott Harshbarger, a Democrat.
Jim Stergios, Pioneer's executive director who is schedule to appear
with Healey today, said the campaigns of some Democrats have expressed
interest in pension overhaul as well, but that Healey seems to have
embraced the proposals most closely.
This is the opening shot on the part of the lieutenant governor to
explain where she's going to find the savings to pay for other
programs," Stergios said.
As for eliminating traditional pensions, the pensions of existing
workers couldn't be changed, according to the Healey adviser. But this
person said the plan is designed with an eye on other states that have
gone to 401(k)-style accounts in recent years, including Michigan and
Alaska. Others states have taken different steps to address rising
pension costs, such as Rhode Island, which last year set minimum
retirement ages for state workers and limited cost-of-living increases.
The National Association of State Retirement Administrators counts 10
percent of all state and local employees as having a 401(k)-style plan,
known as a defined-contribution plan, as their main retirement savings
vehicle, especially university employees.
Healey's plan would require most new public-sector workers to contribute
at least 9 percent of their pretax pay into accounts, up to a maximum of
$15,000 a year. (New police and firefighters would be exempt from this
part of Healey's proposal and would still have traditional pensions,
however.)
Individuals could either open their own IRA-style accounts or put the
money in new accounts managed by the state's PRIT. The state would match
a portion of those contributions. Workers who fear wild market swings
could invest in accounts tied to safer 10-year treasury bonds instead.
Return to top
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