BOSTON — Gov. Deval Patrick’s proposal to change state and municipal employees’ eligibility requirements for retiree health benefits is drawing harsh criticism from those workers and some lawmakers, while reform proponents argue that the present system is unsustainable and needs to be fixed to protect local services from cuts.
Lawmakers on the Public Service Committee last week faced a hearing room packed with municipal workers, corrections officers and labor union groups opposing legislation that raises the age and years of service required for public employees to be eligible for health care coverage in retirement.
Last year, a commission studying retiree health care costs recommended the changes to address a $45 billion to $50 billion total unfunded cost of retiree health benefits at the state and local municipal levels over 30 years.
Patrick’s legislation proposes raising the number of years public employees work before they are eligible for retiree health benefits from 10 to 20 years. It would also increase the minimum eligibility age by five years for each employee group.
For most employees and elected officials, it would go to 60, 55 for specified hazardous duty employees and 50 for public safety employees.
The changes, if approved by the Legislature, would be applied to current employees, with some exemptions for those close to retirement.
The debate comes amid a renewed discussion of long-term benefit issues on Cape Ann, where a new firefighters’ contract in Gloucester has raised concerns over the sustainability of long-term pension costs.
The proposed state changes would not address pension benefits but would reform long-term health-care benefits — including those offered to elected city and town officials, such as city councilors and town selectmen. The issue of health-care benefits has been raised in the past in Rockport, especially.
Many in the crowd at Gardner Auditorium in the State House last week wore shirts and stickers with “HB 59” with a line drawn through it, signifying their opposition to the designated bill.
At times during the hearing, the crowd booed or applauded speakers, prompting Rep. Aaron Michlewicz, D-Boston, who co-chairs of the committee, to scold them. Several times, the crowd became angry when they could not hear people testifying, yelling at speakers to talk louder.
Secretary of Administration and Finance Glen Shor turned to face the audience when he began testifying.
“Gov. Patrick and his entire administration value the many public employees who work in the commonwealth and are committed to providing them with excellent benefits,” Shor said. “Providing health care coverage to state and municipal employees and retirees is an important part of a benefit package that will attract talented employees to a career in public service.”
However, Shor said modifications to the system are “essential to keep the system sustainable for future state and municipal career employees and to maintain core government services for future generations.”
The cost of retiree health benefits for public employees in Massachusetts is among the highest in the 50 states and more generous than 90 percent of employers in the commonwealth, according to Shor.
Retiree health-care costs have grown with rising health-care costs, an aging workforce and longer life expectancy, according to Shor.
David Holway, president of the National Association of Government Employees, threatened a lawsuit.
“I can tell you if this legislation is signed by the governor, there will be litigation,” he said.
Holway said there is no cost-savings, but a shift onto the backs of public employees. Holway said benefits should not change for current employees, regardless of their years of service. “As for current employees, we strongly feel that a deal is a deal,” he said.
But Michael Widmer, president of the Massachusetts Taxpayers Foundation, told lawmakers the state faces “staggeringly large” unfunded retiree health-care liabilities. The liabilities, combined with existing pension obligations, threaten the long-term stability of local government finances, Widmer said, “and are already imperiling municipalities’ ability to provide basic services, including education, public safety and transportation.”
According to Widmer, municipalities spent about $800 million on health care for retirees in fiscal year 2012, an amount equal to nearly 90 percent of the $899 million in unrestricted local aid provided by the state to fund local services.
“Without any reform, retiree health care is projected to cost municipalities more than $1 billion within five years and nearly $1.5 billion in 10 years,” he said.
Both pension and retiree health-care costs are growing faster than municipal revenue, complicated by Proposition 21/2, which restricts the amount communities can levy in taxes, Widmer said.
Sen. William Brownsberger, co-chairman of the committee, questioned how much would be saved annually and asked Shor how much taxes would need to increase if the Legislature chose not to change the system.
The savings grow exponentially over the years, reaching $20 billion over 30 years, while not doing it would require some tough choices, Shor said.
Widmer said if the Legislature does nothing, municipal jobs will be lost.
“Certainly, over time, there will be fewer public employees because we haven’t dealt with this liability,” Widmer said.
Massachusetts Municipal Association Executive Director Geoffrey Beckwith described the current situation as a “looming crisis” that without major reforms will drive up local property taxes and force municipal cuts.
Cities and towns are committed to providing excellent health care benefits in retirement, Beckwith said, but unless the issue is addressed, communities “will face a crisis that will place a much-too-heavy burden on taxpayers.”
He said it was unreasonable to expect taxpayers to vote to pay higher taxes to fund a benefit which is not available to most of them. The MMA estimates that 8 percent of private-sector employees in the state have any type of retiree health insurance benefit from their employers.
But Committee member Rep. James Miceli, a Wilmington Democrat, said the bill was a long way from ready, and he was planning to vote to send it to study — a legislative move that often effectively kills legislation.
“I am not happy with what I am hearing. I am not happy with what I am seeing,” he said.