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August 03, 2007 10:39 pm
Editor's notes: Costly commitment:, third of three parts
Charts on who's getting a $100,000 pension, and comparing pensions at bottom of story
with sidebars Cahill: Sound system undermined by loopholes; How one town cut costs, improved benefits; Early retirement plan costs local taxpayers in N.H.
A question of political will
“You see how hard it is to make minor changes in health care contributions. To make more significant change in pensions is a high hill to climb.”
By Edward Mason and Stacie Galang
CNHI News Service
— People like Anthony Juliano and Leslie Covui have a stake in the debate over public pension reform now under way on Beacon Hill.
Not that they have Massachusetts state pensions. But the disparity between the retirement benefits of private-sector retirees like them and of those at the top of the state pension food chain is one of the things driving the debate. And its outcome will affect their lives and those of every other resident of the state.
Peabody resident Juliano, 68, retired four years ago for health reasons after 23 years teaching computer science at local Catholic high schools and 18 years before that at Honeywell.
He and his wife, Carolyn, depend on Social Security and modest pensions from the Archdiocese of Boston and Honeywell. Nearly all his wife’s Social Security check is consumed by the couple’s health care costs of more than $900 a month. That includes the cost of buying coverage to supplement Medicare — something that would have been part of his retirement package had Juliano taught in public schools.
“We don’t go taking the trips like we used to take,” Anthony Juliano said. “The cars stay in the driveway.”
Covui, 75, of Beverly, spent his last 10 working years at Shaw’s supermarkets. He and his wife, Louise, 82, live almost entirely off their Social Security income of less than $2,000 a month, he said. His supermarket pension provides him less than $50 per month.
“I just wish I started working for Shaw’s earlier,” said Covui, who retired at 62.
But Covui thinks the couple is “doing pretty good” after taking out a reverse mortgage that provides income that will be repaid upon sale of their home.
Reform on the table
Massachusetts politicians have created a public pension system widely criticized as unfair both to many of the people who depend on it and to the taxpayers who help pay for it.
The question now is whether they have the political will to fix it.
Some lawmakers say there is a growing appetite for pension reform, whetted by public outrage over pension padding by the likes of William Bulger. The average state pension is just over $27,000, but the well-connected collect six-figure payments.
Several issues are before legislators. What to do about loopholes that add to the state’s $14.5 billion unfunded pension liability. How to pay for increasingly expensive health care for state and local retirees. Whether to reduce benefits as other states faced with the same problems have.
Rep. Brian S. Dempsey, D-Haverhill, former chairman of the House committee that considered pension legislation, said lawmakers could decide to cap future pension payouts before the session ends in December 2008. One proposal calls for limiting pension payouts to 400 percent of the state average.
“It would be a straightforward response to the concern the public has about pension costs,” Dempsey said.
Sen. Susan C. Tucker, D-Andover, also sees momentum for change.
“We’re moving in the right direction,” Tucker said. “When politicians play games with the pension system, it feeds people’s cynicism. There’s a critical mass of legislators who want to see abuses curbed.”
In July, the Legislature adopted a long sought reform, allowing Massachusetts to take over local pension funds whose investment returns lag the state’s, sapping local budgets of money for schools and other services.
The Amesbury, Lawrence, Methuen and Peabody pension funds fall into that category.
Gov. Deval Patrick signed the measure into law last week. Patrick had filed a similar but tougher proposal, calling for takeover of more local systems.
Passing even the weaker version wasn’t easy, Tucker said, and shows how difficult reform will be.
“No one wants to give up their hand in the pension systems,” she said. “People fight hard to keep their authority.”
Michael Widmer, president of the Massachusetts Taxpayers Foundation, former Dukakis administration official and longtime Beacon Hill observer, could not remember the last major pension overhaul.
“It is always difficult to make sweeping changes in the pension system,” Widmer said. “When you talk about significant change in pensions, you’re talking about state workers and the Legislature.”
Lawmakers and state workers have proven to be obstacles to change, Widmer said. He noted the Romney administration was never able to get the Legislature to increase state workers’ share of health insurance premiums.
“You see how hard it is to make minor changes in health care contributions,” Widmer said. “To make more significant change in pensions is a high hill to climb.”
Rep. Jay Kaufman, a Lexington Democrat and House chairman of the committee that deals with pension legislation, is more optimistic about the prospect of reform.
“We’re off to a great start,” he said.
He pointed to lawmakers’ creation of a $343 million investment trust fund that will help pay for future retirees’ health care, a liability currently pegged at $13.3 billion.
But there is more to do, he said, ticking off a series of changes he thinks the Legislature will pass this session.
Lawmakers will be asked to consider basing pension payouts on salary alone, not perks — a reaction to the Bulger court ruling that counted the former State Senate and University of Massachusetts president’s housing allowance as pay, raising his pension close to $200,000.
They also will consider recommendations by a blue ribbon commission they created last year. Those include reducing the number of job classifications to two — one for dangerous jobs and another for all others. There are now four groups, and they are open to manipulation by lawmakers to enhance the pensions of the favored. The blue ribbon commission also called for a temporary halt to special interest legislation that grants or inflates pensions to individuals or entire classes of workers.
Kaufman said his committee is already following those guidelines informally. His committee now requires representatives of professions seeking to be moved to a higher pension category to submit an estimate of what it would cost.
Some local lawmakers think the Legislature should go further.
Rep. Harriett Stanley, D-West Newbury, wants state retirement benefits to more closely mirror those in the private sector. Stanley would phase-in a new approach to pensions, with new state workers contributing more to their retirement benefits through a 401(k)-style plan while retaining a safety-net pension.
The state already has a deferred compensation plan, called a 457b, but only 56 percent of workers participate and there is no state match. Stanley thinks the state should consider some kind of a contribution to “match” those who save for their retirement in a 457b.
But Stanley said true reform of he pension system won’t be easy. “Because it really is a sacred cow.”
Unions divided
Some unions also want change.
David Holway, who represents 12,000 state workers as president of the National Association of Government Employees, said the Legislature especially needs to take a hard look at the pension classification system, which he considers unfair.
Many of the administrative workers Holway represents are in the lowest-ranking group, retiring later in their careers and with smaller pensions than others.
But he’s not convinced the Legislature will reform that system.
“I’m not sure anyone has the backbone to do this,” Holway said.
Others are less eager for change.
The Legislature’s blue ribbon commission suggested state workers with truly dangerous jobs should be paid more while they’re working, instead of in retirement, as now.
But the State Police Association of Massachusetts, whose members can retire with full pensions as young as their 40s after 25 years of service, would oppose changes to the system.
John Coflesky, association president, noted that state police pay 13 percent of their salary into the fund — more than other state employees.
“We’re trying to fix something that doesn’t need to be fixed,” Coflesky said.
Ralph White, president of Retired Massachusetts Employees Association, declined to discuss proposed reforms because he also sits on the state retirement board.
But he did say he doesn’t believe special pension bills on behalf of individuals affect the pension system. “While politically it causes skepticism, it financially has no impact on the finances of the system because it only represents one or two people (at a time),” White said.
Resistance to sweeping change could also come from state lawmakers who put pension reform below other priorities.
“I don’t think you’ll see a groundswell,” said state Rep. Theodore C. Speliotis, D-Danvers. “Most legislators, their first concern is winning re-election. They care more about Chapter 70 (local school aid) than about pension reform.”
Kaufman said priorities can change.
“It’s difficult to change behavior,” Kaufman said. “But that’s important to do.”
Edward Mason and Stacie Galang write for The Eagle-Tribune of North Andover, Mass. E-mail them at emason@eagletribune.com
The $100,000 club
Retirees who are receiving a state pension of more than $100,000 a year.
Name Department Pension
Arthur Pappas UMass Medical School $231,638.40
William Bulger UMass $197,125.92
Gerald Steinberg UMass Medical School $188,588.52
Richard Farris UMass $173,626.44
William Hogan UMass/Lowell $172,226.80
Edward Riseman UMass $159,950.28
Frank Karasz UMass $155,867.16
Lee Edwards UMass/Amherst $145,482.72
Helen Heineman Framingham State $143,320.92
Linda Slakey UMass/Amherst $142,427.28
Frederick Byron UMass $139,037.88
H.B. Wheeler UMass Medical School $138,880.80
David Bartley Holyoke Community College $137,565.72
Andrew Scibelli Springfield Tech. C.C. $136,522.08
H. Goodman UMass/Boston $135,314.64
Thomas Robbins State Police $134,578.44
Daniel Clapp UMass $130,309.08
Matthew Dumont DMH $129,927.00
Nancy Eckert UMass Medical School $129,704.64
Michael Bratt UMass Medical School $129,016.32
Louis Esposito UMass/Dartmouth $128,912.40
James Leheny UMass $128,357.88
Lawrence Rosenberg DMH $127,741.68
Francis Ennis UMass Medical School $124,266.24
William Macknight UMass $124,085.04
Bradley Hibbard State Police $121,995.96
Carol Amick DPH $120,658.08
Neal Brown UMass Medical School $120,628.32
David Drachman UMass Medical School $119,737.80
John DiFava State Police $119,624.04
John Caulfield III State Police $119,561.40
Christine Kibel UMass $116,896.20
Charles Noyes State Police $116,299.08
Robert Wagner UMass $113,695.20
Susan Goodwin UMass $112,914.72
John Kelly State Police $112,539.60
Robert Marcum UMass $112,504.08
Glenn Anderson State Police $111,464.40
Donald Tipper UMass Medical School $110,894.40
Thomas Foley State Police $110,840.04
Ervin Staub UMass Amherst $110,367.60
Donald St. Mary UMass $109,852.56
Norman Aitken UMass $109,567.80
Martin Quitt UMass $109,517.88
Paul Regan State Police $109,392.84
James Sheehan State Police $109,143.60
James Marcum UMass $108,811.32
Edward Smith UMass Medical School $108,229.32
Barbara Partee UMass $108,081.72
Harlan Sturm UMass $107,697.12
Geraldine Lombardo Trial Court $107,392.70
Janice Stecchi UMass $107,111.76
Paul Cavanaugh Trial Court $105,997.60
William Webster UMass Medical School $105,590.88
Reed Hillman State Police $105,290.76
Oscar Langford State Police $105,120.36
John Cunningham State Police $104,914.20
Ronald Story UMass/Amherst $104,610.60
Peter Hepler UMass $104,504.40
Hanlyn Davies UMass/Amherst $104,194.44
Thomas McBride UMass $103,541.04
Robert Kelliher Jr. State Police $102,755.88
Charles McKinnon State Police $102,073.68
Harold Ameral State Police $101,851.68
Richard Fraelick State Police $101,787.84
Ronald Dipippo UMass Dartmouth $101,749.56
Manuel Kyriakakis Trial Court $101,703.00
Wayne Mackiewicz State Police $101,527.92
Thomas McLaughlin State Police $101,526.36
Paul Shuldiner UMass/Amherst $101,120.04
Richard O'Brien UMass $101,104.20
George Traicoff NSCC $101,057.28
Neil Blacklow UMass Medical School $100,184.60
Thomas Miller Jr. UMass Medical School $100,140.48
Source: State treasurer's office
Comparing pensions
Mass. state pension
Eligible age 55 with 10 years service;
Average annual benefit $27,256
Maximum payout No maximum
Employee contribution 5-12 percent on first $30,000, plus 2 percent for amount over $30,000
Deferred compensation plan 457b
Health insurance State covers retirees not eligible for Medicare and provides supplemental coverage for those who are
Social Security
Eligible age: 62 for 80 percent of benefits; any age with 20 years 65 and 10 months as of 2007 for full benefits
Average annual benefit $12,528
Maximum payout $2,116 per month
Employee contribution 6.2 percent tax on first $97,500, 12.4 percent if self-employed
Deferred compensation plan 401(k)
Health insurance Medicare
Notes
Mass state pension system covers state employees and public school teachers. Public retirees are not eligible for Social Security and do not pay into the fund. Those who worked in the private sector and paid into the system long enough to qualify do receive Social Security.
Eligibility: For public employees benefit levels vary based on group classification and years of service as well as age
Employee contribution: State workers pay 5 percent if hired before Jan. 1, 1975; 7 percent before Jan. 1, 1984; 8 percent before July 1, 1996; and 9 percent if hired after June 30, 1996. State police pay 12 percent if hired after June 30, 1996. Teachers hired after June 30, 2001 contribute 11 percent because of required participation in enhanced benefit program. Teachers hired before that date may choose enhanced benefit program and pay 11 percent.
For Social Security, employer also contributes 6.2 percent.
Deferred compensation: No state match for public employee contributions to 457b.
Health insurance: State pays 85 percent of premiums for those retired after July 1, 1994; 90 percent for those retired before that date. Same split for supplemental Medicare coverage. Some private companies also subsidize health care for retirees.
Sources: Blue Ribbon Panel on Massachusetts Public Employees' Pension Classification System; Group Insurance Commission; Massachusetts Office of the Treasurer and Receiver General; Social Security Administration
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