Pension Obligation Bond Update

MAY 1999 - POB Being Studied By Public Service - As we reported earlier (January Voice),
several bills are now before the Legislature that allow municipalities
to pay off their unfunded pension liability by issuing pension
obligation bonds. As they proceed through the legislative process, we
will be working to insure that our concerns, raised in our earlier
reports, are satisfied.

Originally
the Public Service Committee was scheduled to hold hearings on the POB
legislation later in June. Recognizing the claims by POB proponents
that time is of the essence, the Committee moved up, to this past
March, its hearing on the POB bill (H-1620) filed by the Mass Municipal
Association (MMA), which would allow any community to issue such bonds.

"We
testified on H-1620 and emphasized our concerns about the MMA
approach," reports Legislative Liaison Shawn Duhamel. "Pension funds,
including all investment earnings, should be for the exclusive benefit
of retirees, survivors and employees.

"Additionally,
we believe that the retirement boards should have a more active role in
determining the pension system's unfunded liability and crafting the
'bond plan' to be submitted to the Executive Office of Administration
and Finance for state approval. As we reported in January, there are
several major pension issues, relating to POBs, that dictate the direct
participation of retirement boards in the decision-making process."

One
particularly strong voice of concern, at the hearing on H-1620, was
that of Bob McCarthy, president of the Professional Firefighters. "Our
objection to the use of pension funds for anything, other than
employees and retirees, is hard and fast," emphasizes McCarthy. "We
consider any other use to be a 'raid' on the pension assets". At the
very same hearing on H-1620, McCarthy testified on behalf of their
union's bill (H-1071) to prohibit any such raid.

At
press time, H-1620 is being studied by a special subcommittee of the
Pubic Service Committee. Chaired by Rep. Rachel Kaprielian
(D-Watertown), the subcommittee, which includes our Association, the
Professional Firefighters and MMA, hopes to resolve their differences
and reach a consensus on a final version of the bill.

Communities Continue Push

In
addition to H-1620, several communities have filed individual POB
bills. Included in the list are Brockton, Brookline, Chelsea and
Pittsfield. The Public Service Committee has yet to hold a hearing on
these bills.

According to Hill,
"Ditto the same concerns with these bills that we have with H-1620.
Hopefully, Public Services' special subcommittee will draft a
comprehensive bill that fully addresses them."

While
the General Court continues its work on POBs, Holyoke and Everett are
moving ahead, as authorized by the respective laws for each community
that were passed last December. According to officials in both
communities, they have submitted their POB plans to Administration and
Finance and are awaiting the state's approval. Since the ground work
had been set by Worcester, officials expect to hear shortly.

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