The cost of pensions — those currently being paid and those owed to employees in the future — is strangling the state and its cities and towns.
Retirement benefits negotiated when times were good and public-sector salaries relatively low, are becoming unaffordable. Indeed, one of the provisions of the municipal "relief" bill passed by the Legislature this past session simply pushes back by another decade the deadline by which cities and towns must fully fund their pension liabilities.
These benefits — much better than Social Security — are funded through a combination of employee contributions, investment income and taxpayer funds. Republican gubernatorial candidate Charlie Baker has suggested that in the future the state pension system be self-funded, with taxpayer funds used solely to pay down the yawning gap between what's been promised and what current employees expect to collect when they retire.
He outlined his reforms during a recent appearance before the North Shore Chamber of Commerce's board of directors. They would apply to those with 10 years or less in the system, along with all new hires. Provisions include:
Raising the minimum retirement age from the current 50-55 years to 55-60 years;
Capping pensions at $90,000 a year regardless of pre-retirement salary;
Eliminating the "high three" method of calculating pensions based on one's three highest earning years rather than average salary; and
Eliminating the practice of "group jumping" by which employees can enhance their pension by having their job moved to a higher classification.
As Baker points out, even without the abuses some of his proposals are meant to stop, the current system is unsustainable. After all, he correctly points out, the goal when these pension plans were first formulated was to guarantee workers an "adequate" revenue stream in retirement, not the "glorious" benefits some now enjoy.
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