New Pension Schedule Adopted

JULY 1999 - Cellucci Proves His Case - Following
a string of strong criticism from legislative leaders, the state
treasurer, and this Association, Governor Paul Cellucci released
information supporting his plan to revamp the state and teachers'
pension funding schedule.

Members
will recall that in the May edition of the Voice, the Association
joined House Ways and Means Chairman Paul Haley and Treasurer Shannon
O'Brien in taking the governor to task for his unilateral move to
revalue the Commonwealth's pension funding schedule. The schedule,
through the use of various actuarial assumptions, sets the financial
goals and annual appropriations for the State and Teachers' retirement
systems for the next eighteen years.

By
early May, Cellucci and his top fiscal lieutenants had successfully
made their case justifying the revaluation which reduced the scheduled
state pension appropriation for FY 2000 by $47 million. The scheduled
amount, as determined by the plan revised in 1998, was set to be
roughly $957,000,000. Under the new schedule, the appropriated amount
is $910,024,000.

The information,
released by the Administration, demonstrates that the schedule can be
adjusted after updating the assumed mortality table, instituting an
actuarial value system, and most importantly, accounting for the
exceptional investment returns posted by the Pension Reserves
Investment Trust (PRIT) Fund over the past several years. Through the
analysis of this information, the House and Senate budget writers were
convinced that the funding schedule changes were justified.

"Out
of fairness to the governor we have to set the record straight. What
initially appeared to be a raid on the funding schedule has turned out
to be a justifiable change," explained Association President Ralph
White. "Once the governor provided the background information to the
Ways and Means Committees, the change in the funding schedule began to
make sense. By tightening up some assumptions and taking advantage of
the fantastic earnings, the schedule can be reduced without
jeopardizing benefits.

"However, I
still have to take issue with the manner in which the schedule was
redone. Chapter 32 establishes a clear process to bring all of the
interested parties together to make the necessary adjustments to the
schedule. No one party is supposed to take unilateral action. The
Administration could have avoided a lot of confusion if they had just
played by the rules that we have all abided by for the past decade."

Cellucci
Administration officials, as well as legislative leaders are in
agreement that future revisions must be done by the book in a
bipartisan fashion. The next scheduled revaluation is not scheduled to
take place until December 15, 2002.

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