COLA PROPOSAL BRUTALLY ATTACKED

COLA PROPOSAL BRUTALLY ATTACKED
Michael Widmer, Mass. Taxpayers Foundation

Senate Increases State & Teacher Base

NOVEMBER 2011 VOICE: Heeding our Association’s call to use “Pension Reform III” as an opportunity to address longstanding benefit inequities, the Senate passed a provision within their proposal (S2018) increasing the state & teacher retirees’ COLA base by $1,000 to a new $13,000.

Senate action followed the stamp of approval by the Joint Committee on Public Service, which included the new $13,000 base in the Committee’s draft of the bill. Under the proposal passed by the Senate on September 15, the new base would take effect on July 1, 2012. Although this was quite a step down from our amendment taking the base to $16,000, it at least broke the ice.

As members well know, the last increase in the state & teacher COLA base occurred in 1997, when the base was set at its current $12,000. With the Association’s successful enactment last year of Chapter 188, municipal retirement systems have the local option to increase the COLA base. To date, eight regional/county systems have adopted a higher base, increasing the COLA for retirees in 199 towns.

“I have to thank Senator Katherine Clark and Rep. John Scibak (Public Service Chairs) for helping our state and teacher retirees by increasing the base. While we were hoping to get to $16,000, any step in the right direction is a positive move,” says Association Legislative Liaison Shawn Duhamel.

“Unless we can get to $14,000 when the House acts on the reform bill, I’ll be disappointed,” said Association President Ralph White.

“After all, votes by eight county systems, approved by their local advisory councils, have raised the average COLA base to $15,000 for 199 towns within the Commonwealth.”

Nebulous Analysis

No sooner had Public Service released their proposal than the chorus of public pension opponents began their attacks. Led by the Mass. Taxpayers Foundation’s (MTF) Michael Widmer, COLA opponents erroneously claimed the $1,000 base increase would cost taxpayers upwards of $2.2 billion. MTF is a nonprofit business-backed organization, focusing on a variety of public policy and economic issues within Massachusetts.

Using nebulous math and wrongly factoring in the cost of local COLAs, the MTF was successful in generating an avalanche of negative publicity that resulted in most of the state’s major newspapers calling on the legislature and governor to oppose any COLA base increase.

However, an analysis by the Public Employee Retirement Administration Commission (PERAC) last January reports the added liability of increasing the state & teacher COLA base is approximately $330 million per $1,000 increase. The cost would then be rolled into the Commonwealth’s mammoth pension fund, to be paid for by a combination of employee contributions, asset gains and scheduled appropriations.

To say that the Commonwealth’s very successful $50 billion pension fund cannot handle a compromise $14,000 base would be a setback to state and teacher retirees.

“The ferocity, with which this small increase was opposed, is shocking. When you have a situation where false information is taken as fact, it becomes nearly impossible to counter attack,” said Association President Ralph White. “Most disturbing is the credibility this man has with the media. The public sector and pensions have been targeted and the Mass. Taxpayers Foundation, with its lofty stature, has become sacrosanct.”

Widmer, who has become a vocal critic of public pensions and health insurance benefits, was a panelist at a recent symposium sponsored by PERAC, where he made his case that current pension costs are “unsustainable” in the future. When one considers that countless public and private studies report a career Group 1 employee is now paying for their own pension, Widmer’s assertions are shown for what they are – baseless and shallow attacks.

As of press time, the pension reform bill is before the House, where it is currently under review by the House Committee on Ways and Means. Association officials continue to meet with legislative leaders in an attempt to increase the base beyond the $1,000 for 2012 proposed by the Senate.

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