Gov. Deval Patrick filed legislation Tuesday boosting the retirement age for government workers and capping public pensions, reaching for an election-year legislative victory on an issue that has vexed voters weary of lucrative perks for public employees.
The governor rolled out his plan, which draws from recommendations of a special commission that studied the system last year, as Treasurer Tim Cahill, running as an independent, and Republicans Charles Baker and Christy Mihos campaign against Patrick, all three promoting themselves as more fiscally conservative than the governor.
The administration says its plan, if adopted, would save $2 billion over 30 years. Patrick aides said the savings would be “minimal” upon the bill’s passage but would ramp up quickly as new employees enter the system, with the vast majority of savings derived from higher retirement ages.
Senate President Therese Murray said it appeared Patrick had rolled out many of the ideas weighed by a panel headed by Alicia Munnell, director of the center for Retirement Research at Boston College. The panel ended up divided over reform ideas and proposals based on its work did not take shape last fall, as some anticipated.
“I think most of those things came from the recommendations of the commission,” said Murray.
The cap on pensions proposed by Patrick would limit pensions to a percentage of the federal limit, which could result in a maximum pension of $85,000, based on current data. The cap proposed by Patrick is three times the median U.S. wage. According to the administration, less than 1 percent of current state retirees receive pensions of more than $85,000 per year and the average state retiree receives a pension of about $26,000 a year.
Patrick says he wants to raise retirement ages for most state workers because people are working and living longer than when the retirement ages were set in state laws 60 years ago – overall life expectancy has increased 9.6 years since 1950. Patrick also wants to reduce a “subsidy” for state workers who retire at younger ages.
For elected officials and most other state workers, the retirement age would rise to 60-67, up from 55-65; for workers in hazardous duty jobs the retirement age would rise to 55-62 from 55-60, and the retirement age would jump to 50-57 from 45-55 for firefighters, police officers and some correction officers.
Munnell, in an interview, said the higher retirement ages are “reasonable given the increase in life expectancy and improvement in health of older people.” She said legislators who served on the commission seemed “engaged” and predicted the reforms could pass.
“I think they would really like to get something done,” Munnell said, referring to the Legislature. “I think that he would find a lot of support in the Legislature.”
Patrick wants to pro-rate pension benefits based on employment history, a plan aimed at preventing windfalls based on short periods of employment in groups with higher benefit levels. His plan also eliminates Section 10 early retirement incentives for all state government employees, after such benefits were stripped for elected officials in a pension law last passed last year. Critics of the benefits say they serve to boost the pensions of political hires.
Patrick would extend the “high three” rule, under which payments are calculated on the three highest-paid years of a worker’s career, to a “high five” provision, a change aides say will better reflect career earnings of workers.
The governor is also targeting the Supreme Judicial Court, noting its seven justices are the only state employees who do not currently contribute to the retirement system and forcing them to begin contributions.
Murray said she thought the justices should contribute to their pension accounts.
“That was surprising to me,” Murray said. “But, yeah, everybody should pay into their pension.”
Patrick will also ask lawmakers to pass an “anti-spiking” provision limiting growth in “pensionable earnings” to no more than 7 percent plus inflation of the average pensionable earnings over the previous two years. The provision would not apply to earnings associated with a promotion or job change.
Pension system changes have traditionally encountered strong resistance from public employees unions. The governor says his reforms, if passed, would apply to current state employees “where constitutionally permissible” and to new employees in cases where the constitution prohibits law changes from affecting current employees.
The governor believes it is constitutionally permissible to apply some provisions of his bill to current and future state employees, including plans to pro-rate benefits, the anti-spiking provisions, requiring members who re-enter the system to purchase creditable service within one year or pay a higher interest rate; collecting pension payouts from convicted retirees; increasing scrutiny of individual retirement legislation; and charging retiree health insurance to prior employers. All other provisions of the bill would apply to new hires only, officials said.
Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation, said the savings estimates seemed “reasonable” and predicted the plan, if passed, would lead to savings to help offset pension fund investment losses that he predicted would take years to recover from.
“It’s a comprehensive and thoughtful set of proposals which will put the pension system on much stronger financial footing for years to come,” Widmer said.
Baker released a pension reform plan in December, after the special commission completed its work and after Baker promised last summer to make it a pillar of his campaign.
“He’s imitating me,” Baker told the News Service Tuesday afternoon.
“I’ve been talking about this issue for six months,” Baker said. “Others have been talking about it for a lot longer than that, and three years into the administration for the governor to catch the pension bug is, I think, sort of odd.”Baker’s plan included bumping the retirement age, capping pensions, prorating benefits, and swapping the “high three” provision for calculating pensions based on average salary adjusted for inflation. He also wanted to require a two-thirds legislative vote for any changes to the pension system, and a revenue stream attached to the changes.
House Minority Leader Bradley Jones suggested Patrick should have filed the plan earlier in his term.
“Where has he been? Why has it taken so long for him to file this?” asked Jones. “It’s almost like: ‘I’m filing this so late because I don’t want it to really happen so I can blame the Legislature and run against the Legislature’.”“We welcome him to the cause,” Jones said of Patrick’s proposal.
Treasurer Timothy Cahill, running against Patrick as an independent, declined comment through a spokeswoman, who said Cahill’s office had not received details from Patrick’s office.
Other proposals included in Patrick’s bill:
-- Requiring bills benefitting the pensions of individual employees to be accompanied by a cost estimate;
-- Requiring elected officials to repay the full value of the pension they have receives in order to rejoin the system;
-- Requiring pensioners who rejoin the system or new members eligible to receive creditable service based on work elsewhere to purchase creditable service within one year or pay the full actuarial interest rate;
-- Allowing retirement boards to withhold the processing of pension benefits for retirees charged with an offense relating to their employment;
-- Charging retiree health insurance to prior employers based on the portion of an employee’s service in each jurisdiction;
-- Reducing the employee contribution for new employees who will be subject to the restricted benefit system, a change aimed at ensuring that employees do not contribute more into the pension system than they are likely to receive in benefits. The reduction would apply to elected officials and most general state workers.
