BOSTON — A plan to boost the pensions of Essex County retirees could cost cash-strapped cities and towns tens of thousands of dollars a year.
The bill, pushed by the Essex Regional Retirement Board, would raise the annual cost-of-living increase to the pensions of 1,623 retirees. If approved by the governor, it would be the first cost-of-living adjustment for Essex County retirees since 1987, but the proposal would cost 48 cities, towns and municipal authorities a total of $535,000 a year.
Timothy Bassett, executive director and board chairman, said it's a modest increase for retirees struggling to keep up with rising gas, oil and food costs on an average pension of $16,000.
"It's $5 a month, $60 a year," Bassett said. "That's not a lot of money."
Under the plan, the state would raise the base pay on which retirees' cost-of-living adjustments are calculated from $12,000 to $14,000. So for retirees, they would get 3 percent on $14,000 instead of $12,000. The retirement board would be able to raise the base in $1,000 increments with the approval of a majority of the members.
Essex County retirees receive an average $16,000 benefit and are not eligible for Social Security benefits unless they worked in the private sector.
Earlier this year, the Legislature rejected a plan to raise the pensions of 86,000 municipal retirees statewide, after the Massachusetts Municipal Association warned of the cost to struggling cities and towns. Local communities are similarly concerned about the Essex Regional plan.
Bassett said financially troubled communities were considered. The amount on which pension increases are calculated could have been higher.
"It's only the first $14,000 because we thought it was affordable for the communities in our system," Bassett said.
Moreover, the cost would be offset by a 2 percent discount Essex Regional is offering communities that pay early, Bassett said.
The Essex Regional Retirement Board serves 19 towns, including Boxford, Hamilton, Ipswich, Middleton and Topsfield, as well as local housing authorities and school districts.
Even with the governor's signature, the pension increase isn't a sure thing. Cities and towns still get to vote on whether to implement the plan.
After becoming law, the proposal would be vetted in public hearings across Essex County. It would then have to be sanctioned by a majority of the treasurers of the system's 48 members. Still, if a majority of communities approved the increase, the rest would have to pay.
"It's majority rule," Bassett said.
Cities and towns could get relief. A provision in the bill would extend the time the Essex Regional Retirement Board has to come up with the money needed to pay all of its retirees. Right now, it has until 2028, but it would have until 2038 under the bill.
But that, too, has been criticized.
Steve Poftak, research director at the Pioneer Institute, a conservative think tank, likened the provision to mortgage payments. Extending the time to pay off the liability may lessen individual payments, but the additional accrued interest adds to the overall cost. Poftak said he doesn't have an issue with helping poorly compensated retirees but warned against raising towns' costs.
"These folks aren't getting rich," Poftak said, "but it comes with a cost."
This isn't the first time the Essex Regional Retirement Board has sought a cost-of-living increase for its pensioners. The Legislature passed an identical bill in 2006, but then-Gov. Mitt Romney allowed it to die without becoming law.
It's unclear where Gov. Deval Patrick stands on the issue. A spokesman said the governor is reviewing the bill. He has until July 31 to sign it, veto it or return it with amendments.
