This year’s state budget includes language which I sponsored that changes our approach to achieving transparency for the MBTA Pension Fund.
Last fall, Boston media outlets sought to use the new legal tool to obtain records from the fund and the fund declined to produce records. The matter was appealed to the Supervisor of Public Records who found in the fund’s favor despite our new law. The Supervisor’s reasoning turned on a particular statutory interpretation which I differed with, but also raised broadly the issue of whether the retirement fund is a public entity.
In response, last February, the Committee on Public Service, of which I was then the Senate Chair, convened a hearing on the issue. The MBTA pension fund appeared and testified. Their testimony altered my legal understanding of the situation. I came to accept that, unlike every other pension fund in the Commonwealth, the MBTA pension fund was originally created by a collective bargaining process. Although it receives contributions from the taxpayers, it is, in fact, a private entity.
The history is interesting. In the 30s and 40s, as the automobile became widespread, private companies that had made money providing urban bus and rail service went bankrupt. In a process that happened in region after region across the country, state and local governments took over the necessary role of supplying public transit, in many instances taking over the assets and liabilities of the private companies. The MBTA is the descendant of a consolidation of private entities in the late 40s. These takeovers were specifically protected by federal law and state/local ability to alter the terms of the underlying labor agreements is limited.
While I had previously seen the fund’s refusal to comply with records request as entirely a matter of recalcitrance, I now see its refusal as the result of conflicting legal obligations. The collectively bargained pension agreement that governs its behavior does include language which appears to impose an obligation of confidentiality. So, when we imposed a disclosure obligation on the fund’s board, they were in an uncomfortable legal squeeze.
Through the spring, we engaged in conversations with the board. I found that the board, and in particular, the head of the Carmen’s union, were very open to improved disclosure, but just not in a way that conflicted with their legal obligations. We eventually agreed on a three part solution to the problem:
- First, we would repeal the flawed language we had passed last year.
- Second, we would put in place new language requiring the MBTA itself (as opposed to the fund) to routinely place all the details of who is receiving pensions and how much on the state’s open checkbook website. While the fund has an obligation of confidentiality, the MBTA is a distinct entity and obviously a public entity and has all the same information as to pensioners. The MBTA had previously made the details of pensions available upon request from journalists, but our language will make that disclosure routine and accessible to the public.
- Third, we reached an understanding that the Carmen’s Union would negotiate with the MBTA a change in the pension agreement to require the fund to produce an annual report meeting the high reporting standards of the Government Finance Officers Association. My view is that a report meeting these standards will require the fund to actually create new audited schedules that go well beyond what could be obtained by public records requests. (Note: At this time, the Carmen’s contract is still in negotiation on other issues, but this issue is not in dispute.)
These improvements in disclosure will take some time to implement. I am very hopeful that if remaining gaps in disclosure of important details become of concern, the leadership of the fund will work with the public to fill those gaps. The current President of the Carmen’s union, Jimmy O’Brien, is very oriented to disclosure of the fund’s operations — something that his members fully support. Union members also contribute to the pension fund and do not wish to see their contributions squandered on expensive consultants or poor investments. As one commented on the Carmen’s union website:
I have no problem with . . . OUR retirement fund reporting the handling of the investments and losses to the state for the proper transparency. [T]his will protect WE THE PARTICIPANTS.
See recent Globe coverage here. Note: perhaps in response to this mixed press, the Governor vetoed our repeal of the language that we passed last year — language which sounds good, but is ineffective for the purpose of improving MBTA pension fund transparency.