GOVERNOR PATRICK OUTLINES PRIORITIES FOR COMPREHENSIVE PENSION REFORM
Meaningful steps to close loopholes and end abuses of public employee pension benefits
BOSTON – Sunday, March 22, 2009 – In advance of expected legislative debate on pension reform legislation, Governor Deval Patrick today outlined his priorities for closing loopholes, ending abuses and restoring the public’s trust in state and municipal retirement systems. Pension reform is a critical component of the Governor’s Massachusetts Recovery Plan to help change the way government does business and secure the state’s economic future.
“The gaming of the public retirement system by a few undermines the system’s credibility and ultimate sustainability for all public workers and makes citizens question the integrity of their government. This is unacceptable,” said Governor Patrick. “I applaud Senate President Murray, Speaker DeLeo and all of my partners in the Legislature for their commitment to addressing loopholes and outdated practices, especially at this time of economic hardship.”
Citing the work of the Legislature’s Joint Committee on Public Service’s Blue Ribbon Panel on Pension Classification and the House Special Committee on Pensions, Governor Patrick recommended the following provisions to end the most extreme cases of pension abuse be included in reform legislation being considered in the House:
MBTA: Align MBTA Pension System with State System – Uncommon and excessive benefits in the MBTA pension system exacerbate the transit agency’s finances which is burdened by $8 billion of debt. Special perks such as the “23 years and out” rule that allow employees to start receiving a pension earlier than any reasonable retirement system should be abolished. Although the Governor proposed this remedy in his transportation reform bill, it is important to pursue this much needed modification in pension reform legislation as well.
Regular Compensation – Limit the definition of “regular compensation” to only wages and salary for the purpose of calculating annual benefits, ending the practice of including non-salary items such as housing and transportation allowances and retirement annuities to calculate the benefit.
One Day/One Year – Remove the “one day, one year” provision which currently grants some public employees an entire year of creditable service for as little as one day of work which can boost a pension by thousands of dollars a year. Pension credit should be accrued only for actual time employed.
Pension Credit Buyback – Prohibit the purchase or so-called buyback of pension credit for years served as an unpaid local official in positions such as a town moderator. Purchasing credit for this type of service requires a minimal monetary contribution yet provides as much credit and benefits to a pension as full-time salaried work. Additionally, when such service buybacks occur towards the end of an employee’s career, the pension system does not benefit from investing the funds for years which would generate returns to support the employee’s enhanced pension.
Section 10 Termination Benefits – Eliminate for new hires and elected officials and tighten eligibility and oversight on so-called Section 10 termination benefits which allow employees with 20 years of service who are terminated or whose positions are eliminated to begin collecting an enhanced pension before the standard minimum age of 55.
Dual Service – Eliminate “dual service” pension enhancements to prohibit public employees from collecting two pensions at the same time.
Double Pensions – Eliminate double pensions by changing provisions which allow some employees to qualify for two pensions. Currently, judges with other vested service can collect two pensions because state pension law provides judges with a separate pension benefit.
Disability Retirement – Change the salary formula for Accidental Disability Retirement calculations to end the practice of paying exaggerated future benefits on the basis of a short-term temporary assignment to a higher salaried supervisory position. Currently, the employee’s disability retirement is calculated based on the higher temporary position, regardless of the amount of time spent in that position.
The Special Commission on Pension Reform charged with examining a broad range of additional issues will hold its first meeting next Tuesday, March 31st. These issues include dollar limits on pension benefits, disability retirement reforms, other post-retirement benefit changes and system administration improvements. The Governor is prepared to work with legislative leaders on these matters once the Commission completes its work.
“The economic crisis presents us with significant opportunities to confront issues we have avoided in the past,” said Governor Patrick. “There is broad consensus that our pension system is in dire need of reform. If we can seize this opportunity and others like it, our Commonwealth will be stronger in the long run.”
Pension reform is a key part of Governor Patrick’s Massachusetts Recovery Plan. The plan, unveiled last week, will combine state, federal and, where possible, private efforts to provide immediate and long-term relief and position the Commonwealth for recovery in the following ways:
- Deliver immediate relief by investing in the road, bridge and rail projects that put people to work today and providing safety net services that sustain people who are especially vulnerable during an economic crisis;
- Build a better tomorrow through education and infrastructure investments that strengthen our economic competitiveness, prepare workers for the jobs of the future and support clean energy, broadband and technology projects that cut costs while growing the economy; and
- Reform state government by eliminating the pension and ethics loopholes that discredit the work of government and revitalize the transportation networks that have suffered from decades of neglect and inaction.
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Excellent news about pension reform. The measures set forth in the Gov’s bill will save a decent chunk of change, and perhaps more importantly will help restore people’s trust that government doesn’t exist simply to enrich its friends.
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p>This is an essential first step down a long and difficult path. It’s a necessary but almost certainly not sufficient step toward getting our entire pension system on solid footing. Gary had some interesting comments on pension reform, which I’m importing from another thread.
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p>I don’t agree with gary that the Gov’s bill is “window dressing.” Rather, as I said above, I think it’s an essential first step to establish good faith with the public. But gary’s right that more will need to be done.
A weekend full of surprises. Can ethics reform be far behind? Now we will find out who amongst the legislative geniuses really wants the change they have been discussing. Can the legislature avoid their impulse to water down what is a taxpayer friendly first step by Deval?
Nope — in fact, I suspect they’ll get to that before pensions. It’s in the cards — this year.
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p>If the reforms are meaningful (and successful), people will recognize them as worthwhile and will give grudging credit for them, for the most part where credit is due.
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p>If it all turns to symbolism that does not in fact deliver, then not so much.
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p>If it just fails–I mean, it’s no done deal–then shame on everyone. On those terms, Patrick has really put himself in the hands of the Legislature, who will decide whether this is reform or deck-chair reorganization.
living in Massachusetts a long time has given me the right to be, but I would hold the applause for these reform measures until they pass through the gauntlet of the Legislature.
this helps the Governor. And he needs help!
Why did it take a recession and the screaming from AHoles like me to do the right thing? This stuff was just a disgusting two years ago as it is today. That is why people like me are truely pissed and that is why all you progressives need to ask yourselves “why the F**K did it take so long to do the right thing?” And, that is why Doug Rubin’s words rang so very hollow yesterday. This could have and should have been done before.
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p>Please do not make your response about me. Answer the question.
Two years ago, very cogent proposals by the Gov got rejected out of hand by the lege, which set itself in opposition to them (corporate tax loopholes, local options taxes) which were all proposed to help ease the burden on property taxes – one of the Gov’s big campaign promises. Everything he did (including the casino proposal, which I’m glad went down in flames) to do that very essential thing died a quick death.
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p>Frankly, I’m glad he didn’t propose the reform stuff earlier. First, politically, it will have an easier time passing due to the “screaming from AHoles” putting real pressure on the legislature to act. Two years ago? Dead on arrival. Second, Patrick has had time to develop his relationship with the legislature and get them to trust him more. Reforms about the Turnpike and other quasi-independent agencies, among other things like pension reform, were just going to stay Gubernatorial proposals, ignored by the lege, until things either got hot, or we got a better legislature. So, I think you are being overly hard on him, when really, you should be angry at the Beacon Hill culture that wrought the problem, and held the line against reforming it, in the first place.
The Governor spoke about pension reform back in October, during the first round of emergency budget cuts. This has been an issue we have been working on for a while. In his State of the Commonwealth speech this past January, he talked about embarking on a season of reform, and mentioned as one of his top initatives passing meaningful pension reform this session.
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p>So, the fact is this is not an issue the Governor has just come to recently. And the fact that Speaker DeLeo has also made it one of his top priorities, and that both the Speaker and the Senate President are in today’s Globe story supporting pension reform legislation, indicates a real willingness on everyone’s part to get something done soon.
Ethics?? Can’t happen fast enough.
that the Governor does not control the Legislature? Separation of powers, and all that. The Gov filed his ethics reform bill over two months ago.
You are the smartest kid in the class. I also know he appointed a very special friend to a 12 yr vacated job to the tune of $175k. That’s ethics!
You seemed to be asking about legislation, since that’s the topic of this thread (if you want to talk about something else, start a different one). I gave you information that you seemed to lack. Then you changed the subject to complain (once again) about the Marian Walsh appointment. The Walsh thing is a fair topic for discussion — and we’ve discussed it at length here — but you do know, I hope, that it’s not a state-funded job, so the $175K is not coming from taxpayer funds. The only out-of-pocket cost to the state is the special election to fill her seat.
it is a job that she may not have been qualified for if we did a “nation wide search.” Essentially what the Governor did was use his influence to give someone a rather sweet kiss. A $99k kiss. As far as it not being a state job, bull. It is a job that was vacant for 12 years. I believe I have defined an ethics violation.
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p>Bring on the progressive apologists!!
If you really believe this is an ethics violation, quit whining about it here and file a complaint: State Ethics Commission
Here is a quote that sums it up: “Michael Widmer, president of the Massachusetts Taxpayers Foundation, former Dukakis administration official and longtime Beacon Hill observer, could not remember the last major pension overhaul. ‘It is always difficult to make sweeping changes in the pension system,’ Widmer said. ‘When you talk about significant change in pensions, you’re talking about state workers and the Legislature.’ (From Newburyport Daily News, August 3, 2007) The story discusses a relatively modest pension reform bill passed that summer, weaker than proposed by the Governor, but: “Passing even the weaker version wasn’t easy, [Sen. Susan] Tucker said, and shows how difficult reform will be.” The article gives a good flavor for why things like this are hard–including competing views of what is the right thing to do. http://www.newburyportnews.com…
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p>And, to be clear, major pension reform was on the agenda, both the Governor’s and the legislature’s, before this recent spate of stories. This from the mass retirees website: “JANUARY 16, 2009: In his annual State of the State Address, Governor Deval Patrick repeated his call for so-called pension reform, urging the Legislature to work with him to enact changes this year. …Last summer, a fifteen-member Pension Reform Commission was created within the FY09 Budget. …While the governor finalizes his appointments and gets the Pension Reform Commission underway, House Speaker Sal DiMasi has established his own Pension Reform Committee within the House of Representatives.” http://www.massretirees.com/sp…
I’ve been a public employee for close to 30 years, and have been very pissed off that some people (Bulger, and the Moderators, for example) have benefited from a system they gamed. Worse, they have so eroded confidence in the retirement system that lots of hard working public employees are worried that the only retirement benefits they have –remember, public employees don’t get Social Security– will be altered at their expense. The system was never designed to compensate college presidents for their housing stipends which is a non-monetary perk, nor was it designed to provide benefits for town moderators who paid next to nothing in because they got paid $300 a year.
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p>So good for Gov. Patrick. There’s nothing in his reform package that will hurt 99.9% of the folks who work for the people of the Commonwealth. He’s just trimming the hedges, and salting the leeches of the system off their undeserved “extra benefits.
I like it. I think it’s crucial that we stay in front of it — specifically, stay in front of those will attempt to delay it, defer it, water it down, and so on and so forth.
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p>I think we’re still going to take heat on these issues until we initiate an outside federal investigation with real teeth. I think the best way to moot the “reform” challenge is to point at a sequence of high-profile perp-walks — corrupt Massachusetts Democrats prosecuted by honest Massachusetts Democrats.
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p>Some of us are old enough to remember that our (national) party was not always progressive. It was at another time of crisis like this — specifically, immediately after the 1968 national convention in Chicago — that we made it clear that there was no room for racism in the Democratic party. We should remember that many of the infamous names from the civil rights era — Lester Maddox, George Wallace, Strom Thurmond, Jesse Helms — were all Democrats, until Democratic progressives took a stand. It is no accident that many of them landed in the GOP — and that dynamic worked very much to our advantage in electing President Barack Obama, and Bill Clinton before him.
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p>I think we need to similarly take a stand on ethics and corruption in Massachusetts. We sabotage our agenda and vision when we tolerate these abuses. It isn’t enough to point our collective finger at the flagrant corruption that so characterized the corner office during its long domination by the GOP. Now is the time for all of us to demonstrate that we are different.
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p>This action is an excellent starting point.
would be to ask Deval to resind Senator “divinity school’s” promotion. In the absence of that he is a fraud.
Why doesn’t the plan pay attention to the IRC 415 limits on maximum benefits?
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p>Reported that a high level MBTA executive retired in his mid 40s with a $130k annual pension. Under IRC 415, maximum benefit in 2009 is $195,000, actuarially reduced for commencement for retirement prior to age 62. Dependent on your factors, a 46 year old under IRC 415 could receive no more than an annual benefit in the $65-70k range. Under the private sector, such violations lead to disqualification of the entire plan. Know there is this “argument” that private sector plans cost the government tax revenue due to excessive benefits/deductions, but pretty clear that excessive benefits in the public sector grossly inflate cost of government.
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p>Will ask about this at the Enrolled Actuaries Meeting in DC.
Holy crap! When is that? I hope they’re not sold out! đŸ˜‰
for sure David. Of course, we actually know what the heck we’re talking about in this little area of expertise (but we of course we won’t ever put that in writing).
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p>Know how to tell the difference between an extroverted and an introverted actuary? The extroverted actuary stares at your shoes.
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p>All kidding aside, the MBTA plan ran well afoul of legal limits. There are some serious problems here.