Pension/OPEB obligations

I was at the Selectmen’s meeting, in Belmont, last night where a citizen was having a conversation about the upcoming meeting about the Pension/OPED obligations. It sounded pretty bad. I asked if, at least, the town was not continuing to hire people and promise them benefits which they are unlikely to receive. David Kale explained that, yes, the town still did promise new employees these benefits including lifetime health insurance and that this was a state issue that should be taken up with our state senator and representative. So I am writing to you and Dave Rogers. You know the old adage “What can you to to get out of a hole? Stop digging.” If David Kale is right, apparently the state does not believe this. Do we live in a surreal world where the towns/cities of Massachuseets are looking at possible credit defaults and bancruptcy and continue with business as usual? I am sure this is more complicated and involves collective bargaining and other institutional issues. Really?

2 replies on “Pension/OPEB obligations”

  1. Hi Roger,

    Hope you saw the presentation on Monday on these issues.

    Bottom line is this: Reforms are indeed needed. Both pension and OPEB are issues that I’ve given a lot of attention to and you can read more on my work here.

    The concerns are real, but they are long term in nature. Most communities in Massachusetts are solid financially — Belmont, Watertown and Boston are certainly in good shape.

    1. It might be worth remembering that the Commonwealth only contributes 3.2% of salary to the pension fund while employees must pay 9% or 11%. Also the Commonwealth does not pay the 6.2% FICA tax and so state employees don’t get social security.
      So every private employer actually contributes at least twice as much into their employees retirement as the Commonwealth does for state workers.
      The state pension plan is amazingly inexpensive for the MA taxpayers. The recent headlines about under funding are panic mongering. The underfunding is due to investment loses in 2008, but the vast majority is because the state didn’t bother to put in its 3.2% over the years. So if people want to get rid of the MA pension I say go ahead, distribute the money in PRIT and MSERS to the current employees and retirees and implement a DC plan and FICA payments. The cost to the taxpayer would immediately jump from 3.2% to around 9.4% of salary (state’s match + FICA). That would cripple the budget. Here is a useful analysis that I’m sure is well known by our Reps and Sens, but more MA tax payers should read it.

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