To:       Members of the State Senate

From:   Public Employees Coalition on Public Employee Pensions

RE: OPPOSITION TO PENSION BILL

The pension bill that is scheduled to come to the floor of the Senate on Thursday, Sept. 15, substantially reduces pension benefits for future public employees. We are opposed to this bill.

Claims have been made that these changes are needed to protect the state’s bond rating, which reportedly could be hurt by the state’s large unfunded pension liability. However, the bill does not reduce the unfunded liability. The unfunded liability is a serious problem, but it was incurred decades ago when pensions were funded on a pay-as-you-go basis and insufficient funds were set aside. The problem was not caused by future employees, and they should not be required to receive smaller pensions because of it.

Under the bill, employees would have to work longer to reach the maximum benefit level, which would be based on the highest five-year average instead of the highest three-year average, resulting in a 3 percent decrease in the value of their pensions. It would also increase the minimum retirement age by five years. 

Public employees in Massachusetts pay the vast majority of the costs of their pensions. There is no justification for cutting the pension benefits for future public employees. 

The current pension system is affordable.

• Taxpayers save hundreds of millions of dollars a year by not paying into Social Security on behalf of public employees.
• Public employees fund the vast majority of their own benefits.  In fact the government puts in only 3.8 percent toward public employee pensions, far less than the 6.2 percent required by Social Security.

It’s not “overly generous.”

• The average state retiree annual pension is about $28,000. Retirees receive a very small cost-of-living adjustment. The Senate proposal to increase the COLA base from $12,000 to $13,000 is inadequate. It would increase retiree pensions by just $30 a year, or $2.50 a month.

Don’t punish future employees for past mistakes.

• The unfunded liability is large, but it will be paid off by 2040 at the latest. The bill does nothing to pay it off any faster. The money saved by reducing future employee pensions will go into the general fund, not toward paying off the unfunded liability.
• The unfunded pension liability was incurred over many decades, mainly because the system was funded on a pay-as-you-go basis prior to 1983. Future employees did not create the problem and they should not be penalized for it.

For these reasons, we ask that you oppose the pension bill as currently drafted, and we hope that you will support amendments that would help our future public employees, rather than punish them for past mistakes by the Commonwealth and by municipalities.

Respectfully Submitted,

AFSCME Council 93
AFTMA
Boston Police Patrolmen's Association
Mass. AFL-CIO
Mass. Association of Contributory Retirement Systems
Mass. Coalition of Police
Mass. Environmental Police Officers Association
Mass. Municipal Police Coalition
Mass. Nurses Association
Mass. Police Association
MOSES
NAGE
OPEIU 6
Professional Fire Fighters of Massachusetts
Retired State, County and Municipal Employees Association
SEIU 509
SEIU 888
State Police Association of Massachusetts
United Steelworkers, AFL-CIO