Are Huge State Pensions Draining City Budgets?
It’s in the news every day: cities and towns, as well as the state, are broke.
That means services often get cut to try and bring those budgets into line.
At the same time, there are often stories about public employees and disgraced politicians raking in thousands upon thousands of dollars in pensions and benefits.
That situation has maddened Bob from Peabody who asked on our Curiosity Web site, “Why can state and city employees start collecting retirement money after 20 years? No wonder the cities and towns have no money.”
Take the MBTA for instance. Being the first public transit system in the country isn’t the only distinction it can claim. It’s also got the most generous benefits package of its kind. That has Sheila from Stoughton Curious “how you can retire from the “T” after 23 years with medical coverage?”
It’s an unbelievable deal that’s putting unbelievable pressure on the MBTA’s budget. Another fare is on the horizon. Michael Widmer of the Massachusetts Taxpayers Foundation says “the unions have always been very strong at the MBTA.”
These types of deals are common. For instance, a State trooper can collect 60 percent of his pay after 20 years of service. It jumps to 75 percent after 25 years.
The Patrick-Murray administration is making pension reform a priority this legislative session, but Lt. Governor Tim Murray says, “Certainly, there are political constituencies at play.”
He added that “we need to take a review of the whole pension system in its entirety, and make sure that people are getting what they earned and not anything more.”
Some of the state pensions are just mind boggling. Dr. Arthur Pappas pulls in more that $230,000 a year, while former UMass President Billy Bulger takes in about $200,000. One woman walking by Boston Common told us that she thought these pensions were a bit much.
Another said, “It’s unbearable. It shouldn’t happen, not today, not in this economy.”
Pensions like those get astronomical because of the formula used to calculate the benefit. It only takes into account a workers three highest earning years.
There are also other cases, like the one involving former state Sen. James Marzilli, that anger voters. He is awaiting trial for groping women, but that’s not stopping him from trying to bump his pension. The former lawmaker from Arlington is trying to invoke a little known clause that helps legislators who either resign from their seat, or get defeated in an election.
State Rep. Jay Kaufman of Lexington says, “There are enormous inequities in the way the pension system is administered.”
He is now chairing a special commission to reform the system. One of the recommendations is to look across all the different authorities which have different retirement systems in the state. He says one option is to examine if it would be better to bring these programs together; there are currently more than 100.
Trying to sort this out can be confusing. When you deal with pensions, workers at least make contributions into the system. As a result, experts say that these programs have some money to cover the promised benefit.
The problem really gets bad, however, when you bring in health benefits for retirees. Unlike pensions, there are no contributions to cover the expenses. It’s a pay as you go system and it’s really crippling budgets. Widmer said paying for health care “could effectively bankrupt cities and towns.”
That would decimate local fire departments and schools. Murray explained that “if it is something that is not manageable, then it ultimately results in cuts to important local services.”
Bankruptcy is not out of the question when you consider the situation in Vallejo, California. Last year that city of 120,000 residents actually did file for bankruptcy, citing the costs of benefits as one of the main reasons.
If there is one piece of good news tied to this fiscal crisis, it’s that every elected official we spoke to agreed that reform could really happen this time.
The reason is that the consequences of the status quo are so real that they can no longer be ignored.
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