INROADS MADE ON COLA BASE

Counties Are Best Success Story

SEPTEMBER 2012 VOICE: When the Commonwealth’s 103 local retirement systems were released from the shackles of our restrictive $12,000 COLA base in Year 2010 a rare opportunity presented itself to the 103 retirement boards governing these systems.

In the two years (July 2011, July 2012) that have elapsed since the enabling legislation was enacted (Ch 188 Acts of 2010) a total of 39 retirement boards have been able to take advantage of this law.

Of this number, 11 are county  (or as some are called, regional) boards encompassing 246 member towns whose retirees are now receiving a base higher than $12,000.
In addition, retirees of some 203 assorted fire, water, school (non-teachers) districts, and housing authorities etc. which hold membership in the county systems are included.

Cities, Towns

There are 16 cities that have increased their COLA base and 11 towns, which are not members of their county systems that have voted for a higher base. Also, there are two school districts, which have their own retirement systems for non-teaching personnel that upped their base. And, one other system for employees of the Mass. Housing Finance Agency has increased its base.

We must point out that county retirement boards have a more congenial process of COLA improvements than cities and towns. A county retirement board vote must subsequently be approved by the County Retirement Board Advisory Council consisting of the treasurers of each town or unit belonging to the county system. This body (Council) works closely with the board on an ongoing basis.

A city retirement board vote must be approved by the city council. In most cases, a city council will subsequently accept their retirement board’s vote. However, in some cities, the mayor has what amounts to a majority controlling vote among its five board members.

A town retirement board vote must subsequently be approved by town meeting. The path leading to town meeting – selectmen, finance committee, etc – can be hazardous, as is town meeting.

State, Teachers

As reported in the July Voice, Pension Reform III – Chapter 176, Acts of 2011– included an increase in the COLA Base from $12,000 to $13,000 for eligible retired state employees and teachers. Unfortunately the State and Teachers’ retiree COLA base, which impacts over 50 percent of our membership, remains a victim of the Commonwealth’s $18 billion unfunded pension liability.

This huge liability was addressed  in the FY12 State Budget, which extended the liability debt payment schedule from Year 2025 to Year 2040. It also locked in annual budget appropriations for the next five years (through Fiscal 2017), making it a very difficult chore to boost the base in the meantime.

“But it can be done,” says Association President Ralph White. “An extended market up-swing in our Pension Reserves Investment  Trust  (PRIT) Fund would certainly help. We do approach each year with optimism when it comes to the COLA base.

“Even though the number of local boards that have increased their COLA base is less than the fifty percent I had earlier predicted, I would still call Chapter 188 a huge success,” said White.

“The ability of the 11 county or regional systems resulted in bases of between $13,000 and $18,000 for retirees of 246 towns – mostly smaller towns – and a huge number of other county units.”

In addition, progress was made in those systems, which have thus far stayed at the $12,000 level. Some Boards that have accepted laws increasing the pension levels of such categories as a minimum survivors’ allowance or disability retirees’ surviving spouses, for example, have waited to tackle the COLA base until next year.

“Recognizing some systems are in such poor financial shape after the ‘08 losses such that it was a struggle just to pay the 3% COLA, I would have to say we are grateful that all but one board, Leominster with a negative 3-2 vote against a COLA, did vote for the 3%.

“Due to the makeup of the boards, not all boards were a unanimous 5-0 COLA vote. We do believe that all board members elected by their counterpart retirement systems’ members, including Leominster, voted in favor of three-percent,” White said.

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