CLT UPDATE
Tuesday, September 20, 2011
Government Employee
Benefits Reform — The Massachusetts Way
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Last month, in a wide-ranging national survey of
1,000 randomly selected, registered voters, and in 10 polls in
individual states each with 400 respondents, my polling company
found that voters strongly favor measures to pare the compensation
of current and future public employees. They strongly oppose higher
taxes....
Specifically, over three-quarters (78%) say their
state faced a budget crisis this year, and 68% say that the crisis
was resolved with spending cuts. Overwhelmingly they blame
politicians for creating and exacerbating the problems: 48% say
"elected state officials made careless and self-serving decisions,"
while only 6% say "state governments did not tax enough."
The top priorities for resolving current fiscal
issues are to cut government spending (47%) and to ask for greater
sacrifice from current public employees, by having them contribute
more towards their benefits (31%). By almost two-to-one, they think
that current public employees should have to contribute more toward
their pension benefits because of budget problems....
Further, by 48% to 40%, voters say that public
employees' salaries should be "frozen," and they should be required
to contribute more towards their benefits when states face the type
of crises they are now facing. Close to two-thirds (64%) say they
would not be willing to have their taxes raised as a means of
keeping salaries and benefits of current employees at current
levels.
The Wall Street Journal
September 18, 2011
Voters Want State Government Reform
By Douglas E. Schoen
The state Senate today is slated to debate
amendments to a pension reform bill that may further cement the
Legislature’s reputation for doing part of the right thing....
Each wave of pension reform state lawmakers
have considered in recent years has marked but a series of
half-steps toward the reforms that are truly needed: caps on
pensions, simpler administration, an end to the chicanery of
later-career promotions to inflate retirement riches and no
further extensions of the schedules for funding pension
liabilities....
Even if the Legislature approves this package
and the governor signs it into law, pension reform will be far
from done.
A failure to heed the warnings of the MTF on
the cost-of-living provision, or any backsliding on what reforms
and savings this legislation does offer, would be
unconscionable.
A Telegram & Gazette editorial
Thursday, September 15, 2011
Pension tension
Legislature must reject sweeteners
The Senate approved an overhaul of the
state’s pension system on Thursday, but not before the issue the
drove a wedge between heavily lobbied Democratic members
sensitive to stripping public employee benefits and offending
their political base.
The bill, which aimed to address the state’s
$20 billion unfunded pension liability by raising retirement
ages and reducing benefits for future employees in order to save
$5 billion over the next 30 years, passed on a 24-10 vote....
The debate was marked by emotional pleas by
some Democratic senators who urged their colleagues not to push
the burden of existing pension system liabilities and debt onto
future generations of public employees. Others, like Sen.
Frederick Berry, pleaded with opponents not to make the decision
to support the bill more difficult by forcing them to take
repeated recorded votes on amendments dealing with employee
benefits....
Sen. Kenneth Donnelly, a Arlington Democrat,
led the push against the bill, claiming the reform was being
driven by “beancounters” and “bankers” and ignored the
retirement needs of workers. Donnelly argued that current and
future employees already pay the full freight of their
retirements with the highest contribution rates in the country.
“As a state with one of the largest debt
burdens in the country, I understand why the rating agencies
want us to address the unfunded liability, but the state has not
paid its fair share,” Donnelly said during his opening remarks
on the bill. “When decent pensions go away, it’s the working
class and middle class families that will suffer.” ...
After a pair of tight roll calls and saying
he feared his Democratic colleagues were setting up him and
other Democrats for a series of potentially damaging political
votes, Sen. Frederick Berry, a Peabody Democrat and the Senate
Majority leader, appealed to his colleagues to resist insisting
on recorded votes on amendments to the bill....
Sen. Steven Tolman, who is poised to leave
the Senate this fall and become president of the Massachusetts
chapter of the AFL-CIO responded, “I’m not convinced that we
shouldn’t roll call every vote today." ...
The House has not yet set a timetable for
consideration of the bill.
State House News Service
Thursday, September 15, 2011
Senate agrees to pension reform, benefit issues divide Democrats
The Massachusetts Senate on Thursday approved
an overhaul of the state’s pension system that pushes back the
retirement age for future public employees and changes the
formula for how pension benefits are determined....
The bill estimates savings of $3 billion for
the state and $2 billion for municipalities over the next 30
years by raising the minimum retirement age for most state and
municipal employees from 55 to 60 while increasing the minimum
age for receiving the maximum pension benefit from 65 to 67....
Pension benefits under the proposal would be
based on the average of an employee’s five highest wage-earning
years, replacing the current three-year formula....
Earlier this year, the Legislature and the
governor agreed to extend the schedule for fully funding the
pension system from 2025 to 2040 to save the state $800 million
in the current fiscal year, but with a potential cost to the
state of $30 billion between now and 2040....
Critics of the bill said the state could find
savings through other methods. Public employees should not lose
benefits because the state did not set aside enough money during
good times, they say.
Associated Press
Thursday, September 15, 2011
Senate approves shakeup of Massachusetts pension system
The Massachusetts Senate passed legislation
yesterday that would make public employees work longer for less
benefits in an effort to shrink an estimated $20 billion
unfunded liability in the state pension system.
The bill, which cleared the Senate by a vote
of 24 to 10, is designed to save the pension system $5 billion
over 30 years by reducing the benefits of public employees hired
after Jan. 1....
Reducing the benefits of unionized workers
has traditionally been a tough sell in labor-friendly
Massachusetts, and supporters of the overhaul acknowledged
during the four hours of debate that the bill is unpopular with
organized labor, a major constituency of the Democratic Party.
The Boston Globe
Friday, September 16, 2011
Senate approves pension overhaul
Bill would cut benefits for future state workers
Overly generous public employee pensions and
benefits have taken a heavy toll on the state's finances. If the
state continues to operate the pension system the way it runs
now, it will find itself on the road to insolvency.
Maintaining the status quo is unsustainable.
A Springfield Republican editorial
Monday, September 19, 2011
Massachusetts Senate acts responsibly on pension overhaul
Yet the bill contains provisions that would
cost billions of dollars, such as reducing contributions for
some long-serving workers and making all retired, current, and
future retirees eligible for larger cost-of-living increases.
This last provision illustrates a deeper
problem: Lawmakers have generally maintained that benefits for
current employees must never be diminished - not by a penny -
but have been willing to increase them time and time again.
Worse yet, while the savings from the other provisions in the
bill will accrue only over time, a greater cost-of-living
increase will cost money right away. Without such a provision,
though, the reforms in the bill won’t be palatable to the
public-employee unions that so many lawmakers rely upon for
support....
Which is all the more reason lawmakers
shouldn’t add to the state’s pension obligations for political
reasons. When the House takes up the measure, it should cut out
the pension enhancements - and go for the savings alone.
A Boston Globe editorial
Monday, September 19, 2011
Don’t add to pension problem by upping cost-of-living raises
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Chip Ford's CLT
Commentary
Another small step toward reforming government
employee benefits was adopted by the state Senate last Thursday.
(I've stopped calling them public employees since they've
decided to serve themselves rather than the public which pays for
everything they can grab; government employees seems a much
more accurate term.)
In 2007 the Legislature passed a bill inviting
municipal government employees to join the state's larger and less
expensive GIC health insurance plan. One step forward, one step
back. The law gave the unions veto power over the decision.
In the ensuing years very few unions deigned to switch, so earlier
this year more teeth were put into the state's "invitation,"
limiting collective bargaining but adding a sweetener: giving
employees up to 25 percent of the municipal savings from insurance
switch. A step-and-a-half forward, another step back.
Now the Legislature —
at least the state Senate so far — it
taking another bite, though again with stutter-step hesitation that
has marked previous efforts.
The Worcester Telegram & Gazette noted in its
editorial, "Pension tension":
Each wave of pension reform state
lawmakers have considered in recent years has marked but a
series of half-steps toward the reforms that are truly
needed: caps on pensions, simpler administration, an end to
the chicanery of later-career promotions to inflate
retirement riches and no further extensions of the schedules
for funding pension liabilities....
Even if the Legislature approves this
package and the governor signs it into law, pension reform
will be far from done.
The Boston Globe, in its editorial "Don’t add to pension problem by upping cost-of-living raises,"
went even further:
Which is all the more reason lawmakers
shouldn’t add to the state’s pension obligations for
political reasons. When the House takes up the measure, it
should cut out the pension enhancements - and go for the
savings alone.
According to the State House News Service, this
Senate bill addresses "the state’s $20 billion unfunded pension
liability by raising retirement ages and reducing benefits for
future employees in order to save $5 billion over the next 30 years.
But Sen. Stephen Brewer (D-Barre), the Senate Ways and Means
chairman, noted that "state officials, by extending the pension
system funding schedule out 15 more years this year to 2040, were
'kicking the can down the road,' and said the bill, which raises
retirement ages, represented “modest accommodations in order to save
the defined benefit plan” enjoyed by public employees."
This modest and long overdue reform proposal now
goes to the House for a vote, or amendments. It was the House that
held strong earlier this year with the GIC health insurance reform,
so let's hope it works to excise the "enhanced" pension giveaways
such as larger cost-of-living increases. According to the so-called
Massachusetts Taxpayers Foundation, this giveaway alone will add $2
billion over the next 30 years to the unfunded pension liability.
The state's current $20 billion unfunded pension
liability was projected to be fully funded by 2040. The Senate's
proposal as adopted will
allegedly save $5 billion over that period.
How many of us will be around in thirty years to
see if these half-steps actually work? That's a whole new generation
of government employees to come.
Oh well, we've been hanging in here waiting for
the "temporary" income tax hike of 1989 to be rolled back to 5
percent as promised 22 years ago, so what's a few more decades?
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Chip Ford |
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The Wall Street Journal
September 18, 2011
OPINION
Voters Want State Government Reform
Polling in 10 states shows that Americans want politicians to cut
spending and reduce public employee benefits before they raise
taxes.
By Douglas E. Schoen
Americans believe that bold action to restrict spending is necessary
to stabilize the finances of state government.
Last month, in a wide-ranging national survey of 1,000 randomly
selected, registered voters, and in 10 polls in individual states
each with 400 respondents, my polling company found that voters
strongly favor measures to pare the compensation of current and
future public employees. They strongly oppose higher taxes.
Specifically, over three-quarters (78%) say their state faced a
budget crisis this year, and 68% say that the crisis was resolved
with spending cuts. Overwhelmingly they blame politicians for
creating and exacerbating the problems: 48% say "elected state
officials made careless and self-serving decisions," while only 6%
say "state governments did not tax enough."
The top priorities for resolving current fiscal issues are to cut
government spending (47%) and to ask for greater sacrifice from
current public employees, by having them contribute more towards
their benefits (31%). By almost two-to-one, they think that current
public employees should have to contribute more toward their pension
benefits because of budget problems.
A majority (51%) say they would not be willing to cut "social
service programs provided by your state" to maintain the
compensation of public employees; and 60% say that "education and
health care" should not be cut so that "the salaries and benefits of
public employees could be paid at current levels."
Further, by 48% to 40%, voters say that public employees' salaries
should be "frozen," and they should be required to contribute more
towards their benefits when states face the type of crises they are
now facing. Close to two-thirds (64%) say they would not be willing
to have their taxes raised as a means of keeping salaries and
benefits of current employees at current levels.
However, there is a clear distinction in voters' minds between what
current public employees should be asked to contribute and what
retired public employees should be asked to contribute. Sixty-nine
percent say retirees should "not have to" contribute more towards
their health-care benefits or take a reduced pension because of
state and local government budget problems.
A majority (56%) supports reducing certain state services to address
state budget crises if programs need to be cut. Voters are most
inclined to cut libraries and parks services and least inclined to
cut education, health care, police and fire protection. However, a
whopping 60% of voters oppose "increasing state sales, income or
other taxes" to reduce budget deficits.
While there is a clear sense that cutting spending and reducing
salaries and benefits will result in fiscal stability for state
governments, there is no similar linkage between reforming the
collective bargaining process and achieving fiscal well-being for
individual state governments.
Put simply, the voters don't see a connection between the two.
Collective bargaining is not overwhelmingly popular in the abstract.
A majority (50%) agrees that "public employees should not bargain
collectively and use union power to limit or delay the delivery of
important government services." Moreover, 60% of voters feel that
collective bargaining is a benefit "and can be changed and
negotiated based on economic circumstances," while 30% see it as
"essential" and "a basic right of labor." In the recent "disputes
between state governments and public unions over collective
bargaining," voters side with state officials by 46% to 39%.
However, this skepticism towards collective bargaining does not
translate directly into support for the steps that Governors Scott
Walker of Wisconsin and John Kasich of Ohio took in their individual
jurisdictions.
Nationally, the Wisconsin law to restrict public employee collective
bargaining rights was opposed 49% to 45%, and the similar Ohio
legislation was opposed by 45% to 40%. In the states, there was
similar opposition. Wisconsin voters oppose Mr. Walker's measure,
52% to 45%, and Ohio voters oppose Mr. Kasich's measure, 52% to 43%.
Yet the reason for this apparent movement against collective
bargaining reform is that unlike reducing state spending and
benefits, voters nationally and in those two states are not
convinced that clear savings will result from reforming the labor
relations process. By 56% to 33%, voters nationally say "it is
unclear how much money will actually be saved by limiting"
collective bargaining rights.
Voters also reject the notion that reforming collective bargaining
will make government more efficient in each of these two states. A
solid majority (55%) rejects that notion in Wisconsin, and a 45% to
41% plurality in Ohio rejects this notion as well. By large margins
in both states—59% to 17% in Ohio and 43% to 28% in Wisconsin—voters
say it is more important to reform public employee salaries and
benefits than it is to reform collective bargaining.
On other measures that restrict current public employee rights and
benefits, voters say that tenure for teachers should be phased out,
56% to 39%. Fundamental reform of public sector pension plans is
strongly favored. Voters support "moving all new public employees
from a defined benefit plan to a defined contribution plan" by 69%
to 17%.
One of the reasons voters feel so strongly about reducing the level
of compensation for state employees is that they believe that they
are earning disproportionately high wages relative to those in the
private sector.
There is a clear belief that public employees are better compensated
than those in the private sector: 41% of voters think "the salaries
and benefits of most public employees are too high for the work they
do," while 32% think they're "about right" and 13% think they're
"too low."
Voters also think that while public sector workers generally can
retire with full benefits at about age 57 years old, this is too
early. Generally they say the normal retirement age should be 65.
It is clear that American voters endorse a very specific agenda to
reduce spending, pare back employee benefits, and hold the line on
taxes wherever and whenever possible. The electorate clearly shows
sympathy with the concept of limiting collective bargaining rights,
but so far has not seen or come to accept the direct linkage between
restricting that benefit and assuring the ongoing fiscal well-being
of their state.
Mr. Schoen, who served as a pollster for President Bill Clinton,
is author of "Hopelessly Divided: The New Crisis in American
Politics and What It Means for 2012 and Beyond."(Rowman and
Littlefield, 2012). The national survey discussed in this op-ed was
conducted on Aug. 5-10. The states individually surveyed on Aug.
29-Sept. 5 were Florida, Illinois, Indiana, Michigan, Montana, North
Carolina, New York, Ohio, Pennsylvania and Wisconsin. All surveys
were conducted for the Manhattan Institute.
The Telegram & Gazette
Thursday, September 15, 2011
A Telegram & Gazette editorial
Pension tension
Legislature must reject sweeteners
The state Senate today is slated to debate amendments to a pension
reform bill that may further cement the Legislature’s reputation for
doing part of the right thing. The legislation aims to save
taxpayers about $5 billion over the next 30 years, in large part by
increasing the retirement age for new public employees from 55 to 60
and calculating benefits in ways that are somewhat less generous to
retirees.
Unfortunately, the bill must still navigate a minefield of
amendments that could blow up those savings.
They include a seemingly innocuous provision to calculate
cost-of-living hikes on a slightly higher base, $13,000 rather than
$12,000.
That, according to Michael Widmer of the Massachusetts Taxpayers
Foundation, will cost taxpayers a whopping $2 billion over the next
30 years.
Each wave of pension reform state lawmakers have considered in
recent years has marked but a series of half-steps toward the
reforms that are truly needed: caps on pensions, simpler
administration, an end to the chicanery of later-career promotions
to inflate retirement riches and no further extensions of the
schedules for funding pension liabilities.
Even if the Legislature approves this package and the governor signs
it into law, pension reform will be far from done.
A failure to heed the warnings of the MTF on the cost-of-living
provision, or any backsliding on what reforms and savings this
legislation does offer, would be unconscionable.
The liabilities ahead are daunting, and every effort must be made to
lock in whatever savings can be found. Adopting a more sensible
fiscal course now means rejecting even the small favors and
sweeteners that come wrapped in the language of amendments. They
might help ease passage of the bill, but would carry a price down
the road. Hold the line today, and everyone in Massachusetts can
enjoy a more prosperous tomorrow.
State House News Service
Thursday, September 15, 2011
Senate agrees to pension reform, benefit issues divide Democrats
By Matt Murphy and Michael Norton
The Senate approved an overhaul of the state’s pension system on
Thursday, but not before the issue the drove a wedge between heavily
lobbied Democratic members sensitive to stripping public employee
benefits and offending their political base.
The bill, which aimed to address the state’s $20 billion unfunded
pension liability by raising retirement ages and reducing benefits
for future employees in order to save $5 billion over the next 30
years, passed on a 24-10 vote.
The debate was marked by emotional pleas by some Democratic senators
who urged their colleagues not to push the burden of existing
pension system liabilities and debt onto future generations of
public employees. Others, like Sen. Frederick Berry, pleaded with
opponents not to make the decision to support the bill more
difficult by forcing them to take repeated recorded votes on
amendments dealing with employee benefits.
“I think that none of us enjoy cutting benefits that are not overly
generous as they currently exist, but I think it’s a bill that
reflects long-term fiscal stewardship for the Commonwealth and that
was our goal,” said Sen. Katherine Clark, the co-chair of the Public
Service Committee. “Certainly the working class people have been hit
the hardest in this economy. Looking out 30 years we don’t know
where we’re going to be, but we want to maintain a strong pension
system and I think this bill is designed and crafted to do just
that.”
Supporters of the bill called the $5 billion in projected savings
from the pension system changes essential to protecting the state’s
finances and ensuring the long-term stability of the defined benefit
plan for public retirees, but opponents sharply criticized the way
the bill reaped those savings by cutting benefits for future
employees.
Sen. Kenneth Donnelly, a Arlington Democrat, led the push against
the bill, claiming the reform was being driven by “beancounters” and
“bankers” and ignored the retirement needs of workers. Donnelly
argued that current and future employees already pay the full
freight of their retirements with the highest contribution rates in
the country.
“As a state with one of the largest debt burdens in the country, I
understand why the rating agencies want us to address the unfunded
liability, but the state has not paid its fair share,” Donnelly said
during his opening remarks on the bill. “When decent pensions go
away, it’s the working class and middle class families that will
suffer.”
Sen. Stephen Brewer, the Senate Ways and Means chairman, said the
reforms were necessary to preserve the system for future
generations.
“This is not a piece of legislation that wins popularity contests
quite honestly, but frankly responsibility is ours,” Brewer said,
noting longer life expectancies.
The Barre Democrat said state officials, by extending the pension
system funding schedule out 15 more years this year to 2040, were
“kicking the can down the road,” and said the bill, which raises
retirement ages, represented “modest accommodations in order to save
the defined benefit plan” enjoyed by public employees.
The bill increases the minimum retirement age for most public
employees from 55 to 60, and requires those same employees to work
an extra two years until age 67 to receive the maximum pension
benefit. The bill also calls for retirement income to be based on an
employees' highest five years of earnings rather than three years,
and increases the salary base for cost-of-living adjustments by
$1,000 to $13,000.
In one concession to opponents, the Senate unanimously adopted an
amendment lowering pension contribution rates for certain employees
with at least 30 years of service by 2.5 percent, and another 2.5
percent when they hit 35 years of service. The original bill
required long-term employees to put in at least 35 years before
triggering a reduction.
After a pair of tight roll calls and saying he feared his Democratic
colleagues were setting up him and other Democrats for a series of
potentially damaging political votes, Sen. Frederick Berry, a
Peabody Democrat and the Senate Majority leader, appealed to his
colleagues to resist insisting on recorded votes on amendments to
the bill.
Berry said the bill represented one of the "most painful" votes he's
taken in 29 years, telling his colleagues who pressed for roll call
votes: "I really ask you all to consider what damage you’re doing to
your colleagues who perhaps on this one issue are in disagreement."
Sen. Steven Tolman, who is poised to leave the Senate this fall and
become president of the Massachusetts chapter of the AFL-CIO
responded, “I’m not convinced that we shouldn’t roll call every vote
today."
After the debate, Donnelly told the News Service he was not offended
by Berry’s remarks, adding that he didn’t know whether the votes
taken would come back to hurt his Democratic colleagues at the
ballot box.
“I don’t think that was directed to me, and I think we should be
able to say what we want,” Donnelly said.
Donnelly, however, said he was “disturbed” by the outcome, and put
some of the blame at the feet of Gov. Deval Patrick and Treasurer
Steven Grossman who proposed nearly identical legislation back in
January.
“I’m disappointed in the governor, and I’m disappointed in the
treasurer that this has come to this point,” Donnelly said. “We as a
country have continually loaded debt to our children and our
grandchildren and this is what we’re doing with this bill. We’re
asking our new employees that haven’t even come to work yet to pay
the debt that was accrued over the last 40 years, and that goes
against everything we should believe in this country. We should pay
our costs, and if you can’t afford it, don’t buy it.”
The Senate did adopt an amendment offered by Sen. John Keenan
(D-Quincy) prohibiting the state from reducing its annual
contribution to the pension system in future years to address
concerns that the account has been raided in good years instead of
using investment returns to pay down the unfunded liability.
And while Sen. Barry Finegold (D-Andover) backed off his proposal to
automatically increase the retirement age by one year every six
years starting in 2041, the Senate did support his redrafted
amendment calling for an executive branch committee to review
retirement ages every five years.
“It’s not an easy vote. It’s very difficult. I’m a child of two
parents who were teachers and I believe what they have is worth
defending, but I believe if we defend the status quo future pensions
won’t be around and we have to make changes,” Finegold said.
The House has not yet set a timetable for consideration of the bill.
The Senate bill would also eliminate Section 10 early retirement
incentives for all employees, a perk that allows employees with 20
years of service who are terminated at no fault of their own to
collect an early retirement benefit equal to one third of their high
three earning years, plus an annuity from contributions.
Additionally, the bill calls for pro-rating retirement benefits for
employees who worked under several pension classification groups,
and would impose an "anti-spiking" rule limiting the allowable
annual increase in pensionable earnings to no more than 10 percent
of average earnings over the previous two years, unless the raise is
for a legitimate promotion.
Associated Press
Thursday, September 15, 2011
Senate approves shakeup of Massachusetts pension system
BOSTON – The Massachusetts Senate on Thursday approved an overhaul
of the state’s pension system that pushes back the retirement age
for future public employees and changes the formula for how pension
benefits are determined.
The bill aims to save the state $5 billion over the next 30 years
and reduce the state’s $17 billion unfunded pension liability. It
passed by a 24-10 vote.
"We need to do this to maintain the health of the commonwealth’s
pension system and the integrity of the benefit that our employees
depend upon," said Sen. Katherine Clark, D-Melrose, who introduced
the bill.
The bill estimates savings of $3 billion for the state and $2
billion for municipalities over the next 30 years by raising the
minimum retirement age for most state and municipal employees from
55 to 60 while increasing the minimum age for receiving the maximum
pension benefit from 65 to 67.
The changes begin with workers hired after Jan 1, 2012. It also
reduces some incentives for early retirement.
An amendment adopted by the Senate would boost the retirement age by
one year every six years for employees hired in that six-year
period.
The bill must now be approved by the House before moving to Gov.
Deval L. Patrick’s desk. Patrick, who has called pension reform one
of his top legislative priories, filed a similar proposal in
January.
Pension benefits under the proposal would be based on the average of
an employee’s five highest wage-earning years, replacing the current
three-year formula. Critics of the current formula say it has
prompted abuse by workers who accrue many years of service at low
pay, then seek a high-paying job for just three years, allowing them
to receive a benefit much larger than the overall contribution they
made to the system.
Proponents of the changes say this will help the state cover its
unfunded liabilities, which are scheduled to be funded by 2040.
Earlier this year, the Legislature and the governor agreed to extend
the schedule for fully funding the pension system from 2025 to 2040
to save the state $800 million in the current fiscal year, but with
a potential cost to the state of $30 billion between now and 2040.
Fully funding the pension system would also help the state maintain
its bond rating. A high bond rating allows the state to borrow at a
low interest rate.
"A strong rating turns into savings for the commonwealth of millions
in a year that we can invest in our roads and bridges, our schools
and our other programs that we care about," Clark said.
Massachusetts currently has a rating of AA-plus from Moody’s and
Fitch, one notch below AAA. Standard & Poor’s has given the state a
rating two notches below AAA but with a positive outlook.
Critics of the bill said the state could find savings through other
methods. Public employees should not lose benefits because the state
did not set aside enough money during good times, they say.
"We haven’t been paying our share of the debt we owe on our unfunded
liability," said Sen. Kenneth Donnelly, D-Arlington, who filed
several failed amendments that would have protected employee
benefits.
"The rating agencies in New York don’t care where we get the money,"
Donnelly said. "They did not tell us we had to take it from our
future employees."
The bill does increase the base amount for calculating
cost-of-living increases from $12,000 to $13,000, for current and
future workers. It has not been raised since 1998. The state
contributes 2.7 percent to the public pension fund, and public
workers have one of the highest contribution rates in the country.
Lawmakers in the Senate said they were not happy about the overhaul,
but felt it was necessary in the ever weakening economy.
"These are unpleasant exercises. It’s not always easy to do these
things, but the world is changing," said Sen. Stephen Brewer, D-Barre,
the Senate chairman of the Joint Committee on Ways and Means.
Ray McGrath, a lobbyist for the International Brotherhood of Police
and the National Association of Government Employees, said the
overhaul was not necessary because the pension system has been
changed many times over the past decade. Lawmakers are not
considering the positive results of those changes.
"It’s an attempt to provide some political cover for people to say
they are doing something different," he said.
Changing the benefit plans for future employees could hurt the state
in the long run, McGrath said.
"We now have just created a two-tier system. Those who work today
and those who work for the future in public service both on the
state and local level," he said.
The Boston Globe
Friday, September 16, 2011
Senate approves pension overhaul
Bill would cut benefits for future state workers
By Mark Arsenault and Noah Bierman
The Massachusetts Senate passed legislation yesterday that would
make public employees work longer for less benefits in an effort to
shrink an estimated $20 billion unfunded liability in the state
pension system.
The bill, which cleared the Senate by a vote of 24 to 10, is
designed to save the pension system $5 billion over 30 years by
reducing the benefits of public employees hired after Jan. 1.
The proposal heads next to the House, where Speaker Robert A. DeLeo
has not yet set a date for debate and a vote.
Senator Katherine Clark, a Melrose Democrat who is cochairwoman of
the Joint Committee on Public Service, insisted that the proposed
cuts are necessary to ensure that the plan remains solvent for the
next generation of public employees.
“This is not the beginning of dismantling what we have,’’ she said
at the outset of debate yesterday. “It is crafted to protect what we
have.’’
Reducing the benefits of unionized workers has traditionally been a
tough sell in labor-friendly Massachusetts, and supporters of the
overhaul acknowledged during the four hours of debate that the bill
is unpopular with organized labor, a major constituency of the
Democratic Party.
“This is not the kind of legislation that’s going to win somebody a
popularity contest, but frankly the responsibility is ours,’’ said
Senator Stephen M. Brewer, chairman of the Ways and Means Committee
and a Democrat from Barre.
He said that, unlike pension changes passed in other states, the
Massachusetts cuts would not affect current employees.
“What we are doing is not Wisconsin,’’ said Brewer, a reference to a
rollback of union rights in that state pushed by Governor Scott
Walker, a Republican. The changes which provoked waves of protest
and prompted recall efforts against several state senators.
The Massachusetts proposal would raise the minimum retirement age
for most public employees from 55 to 60 and would bump up the
retirement age for maximum benefits from 65 to 67. It would also
change the way benefits are calculated, basing them on a worker’s
top five years of earnings, rather than the top three years, as is
currently the practice.
Opponents of the legislation said yesterday that it is unfair to
push the burden of reducing a deficit onto future employees.
“We’re saying that down the road, because we don’t know them, that
they get penalized,’’ said Senator Steven Tolman, a Brighton
Democrat expected to become the new president of the Massachusetts
AFL-CIO in an uncontested election next month. “We have a problem;
I’m just not sure we have the right fix.’’
Tolman, an active participant in the debate, voted against the bill.
He said he consulted with the Senate counsel’s office and was told
he could participate because he has not yet been appointed or
elected to a new position. He will resign from the Senate after he
takes the union post.
In effort to lessen the burden of the proposed changes on future
long-term employees, the bill would ease early retirement penalties
and lower the salary contribution rate for most employees and
teachers who have worked at least 30 years, according to a summary
released by Senate President Therese Murray.
The overall proposal is similar to a plan offered in January by
Governor Deval Patrick, a Democrat.
Patrick said after the vote that he appreciates that public
employees feel under siege, as cash-crunched states across the
country have looked to squeeze savings from their workers.
“I think there is a sentiment, among the union leadership anyway,
that public employees have been at the sharp end of a lot of
reforms,’’ Patrick said in an interview. “But this has been done in
a very sensitive way that strikes, I think, an appropriate balance,
and I do want the people that work in state government to know that
we respect them.’’
Bond rating agencies are watching the progress of the pension bill
to see that the state follows through on plans to cut pension costs,
said Michael J. Widmer, president of the Massachusetts Taxpayers
Foundation, a business-backed budget watchdog group.
“The rating agencies expect $5 billion in savings,’’ said Widmer,
and it is “enormously important’’ that the state hit the target. If
the agencies lose confidence in the finances of state government,
they could reduce the Massachusetts bond rating, which would
increase the cost of borrowing money.
State leaders met last week with representatives of the nation’s
three main rating agencies to discuss the state’s economy and the
overhaul legislation, Murray said.
“A strong bond rating saves the Commonwealth millions of dollars a
year in interest payments and increases funding available for our
schools, roads, and bridges,’’ Murray said in a statement after the
vote. “And these latest reforms will help sustain and protect our
system for hard-working, deserving employees.’’
But opponents said the proposal will discourage young people from
seeking jobs as police officers, firefighters, and teachers, because
future public employees are being singled out to solve an unfunded
liability that they did not create.
“There should be a shared-sacrifice approach,’’ said Senator James
B. Eldridge, an Acton Democrat.
David J. Holway, president of the National Association of Government
Employees, predicted in an interview that “state government is going
to become a revolving door.’’
In good economic times, workers will bolt for the private sector,
robbing the public of the institutional knowledge needed to make
their government run smoothly, he said.
“I know [pension reform] is a very sexy subject nationally, but I’m
worried about our future work force.’’
The Springfield Republican
Monday, September 19, 2011
A Springfield Republican editorial
Massachusetts Senate acts responsibly on pension overhaul
Members of the Massachusetts House [sic - Senate] Thursday struck a
blow for fiscal stability when they passed legislation overhauling
the state's pension system.
The bill pushes back the retirement age for future public employees
and changes the formula for how pension benefits are determined.
While the bill has been unpopular with organized labor, Sen.
Katherine Clark, a Melrose Democrat and co-chairwoman of the Joint
Committee on Public Service, urged public employees to take the
half-full glass view.
"This is not the beginning of dismantling what we have," she said.
"It's crafted to protect what we have."
She's stating what should be obvious to anyone who understands the
math.
Overly generous public employee pensions and benefits have taken a
heavy toll on the state's finances. If the state continues to
operate the pension system the way it runs now, it will find itself
on the road to insolvency.
Maintaining the status quo is unsustainable.
The bill aims to save the state $5 billion over the next 30 years
and reduce the state's $17 billion unfunded pension liability.
The bill would raise the minimum retirement age for most public
employees from 55 to 60 and would bump up retirement age to maximum
benefits from 65 to 67. It would also change the way benefits are
calculated, basing them on a workers top five years of earnings
rather than three years as is currently the case.
The bill is realistic and fair. It doesn't change the rules for
public employees - teachers, firefighters, police officers and
others - currently in the system.
The proposal now heads to the House. We hope its members will act
just as responsibly as the Senate and pass the bill.
The Boston Globe
Monday, September 19, 2011
A Boston Globe editorial
Don’t add to pension problem by upping cost-of-living raises
Massachusetts needs another round of public-pension reforms. Though
Beacon Hill has made progress in curbing the worst abuses of the
system, public-pension systems still have billions of dollars more
in liabilities than they have money to pay for them. Bond rating
agencies have made it clear that unless Beacon Hill comes to grips
with the problem, the Commonwealth’s ability to borrow money will
suffer. And while the bill that cleared the Senate Thursday will
help in several important ways, it also exacerbates the problem in
others.
On the upside, cuts in the Senate measure will save $9 billion over
30 years, according to calculations by the Massachusetts Taxpayers
Foundation. The changes would include raising the minimum retirement
age for most new public employees from 55 to 60, raising the full
retirement age from 65 to 67, reducing early-retirement benefits,
and calculating a worker’s pension in a more conservative way. Yet
the bill contains provisions that would cost billions of dollars,
such as reducing contributions for some long-serving workers and
making all retired, current, and future retirees eligible for larger
cost-of-living increases.
This last provision illustrates a deeper problem: Lawmakers have
generally maintained that benefits for current employees must never
be diminished - not by a penny - but have been willing to increase
them time and time again. Worse yet, while the savings from the
other provisions in the bill will accrue only over time, a greater
cost-of-living increase will cost money right away. Without such a
provision, though, the reforms in the bill won’t be palatable to the
public-employee unions that so many lawmakers rely upon for support.
Then again, many unions opposed the bill anyway. Deferring to
special interests is the wrong impulse, because the pension
arithmetic could get much more daunting. The main pension fund for
state employees assumes a higher rate of return on its investments -
more than 8 percent - than some analysts think it can realistically
achieve. If it falls short, the choices facing the Legislature will
be that much starker.
Which is all the more reason lawmakers shouldn’t add to the state’s
pension obligations for political reasons. When the House takes up
the measure, it should cut out the pension enhancements - and go for
the savings alone.
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Citizens for Limited Taxation ▪
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