The commission recommends applying these changes to a large share of current employees and all future hires, but protects current retirees and those active employees close to retirement. Even with these adjustments, municipal employees will enjoy far more generous benefits than their private sector counterparts, who in most cases have no employer-sponsored retiree health care benefits.
However, the commission also made a troubling recommendation to prohibit municipalities from adjusting how much they contribute toward premiums once an employee retires. This would strip municipalities of their primary tool to control costs for retirees, and any provision that permanently binds municipalities would be shortsighted. Municipalities have power under existing law to change their contributions for existing retirees, and this authority is critical for many municipalities that otherwise would be forced to make cuts in services. Furthermore, current and future retirees already receive major protections through other commission recommendations.
Underscoring the urgency of retiree health care reform is the fact that municipalities are facing a long-term fiscal squeeze, with their personnel costs growing faster than revenues. Unlike previous recoveries, the state will not be in a position to increase local aid in a significant way for the foreseeable future. Just as the Legislature and governor acted on municipal health care and pensions in 2011, they must act to address retiree health care in 2013 to help ensure the long-term stability of the state’s 351 cities and towns.
Michael J. Widmer is president of the Massachusetts Taxpayers Foundation.