Huge retirement shortfall in cities reported

Group is alarmed by benefit funding

By Travis Andersen
Globe Staff  
January 13, 2012

A Beacon Hill watchdog group has released a report indicating that steep cuts to education and other public services are inevitable in 10 of the state’s most cash-strapped cities to fund the rising cost of health care for their municipal retirees, unless the Legislature makes changes.

According to the report by the business-backed Massachusetts Taxpayers Foundation, the current unfunded liability for retiree health benefits in the cities is $4.5 billion.
The report defines the liability as the amount the 10 municipalities would need to set aside today to fund benefits for current retirees and active employees already eligible to collect benefits when they retire.

The cities listed are Brockton, Fitchburg, Haverhill, Holyoke, Lawrence, Lowell, New Bedford, Pittsfield, Springfield, and Worcester.

Barring steep service cuts in these cities, the average single-family homeowner would have to pay a lump sum of $13,685 to fully fund the health care liability or absorb a 20 percent property tax hike annually over the next 30 years, the report states. Local businesses would also have to pay far more in property taxes, which would force layoffs, according to the report.

“Simply put, the tax increases needed to fund these massive liabilities would crush these cities and their local economies,’’ and voters would never approve them, leading to service cuts unless there are legislative changes, foundation president Michael Widmer said.

The report calls for several changes in state law to prevent the cuts, including raising the eligibility age for retiree health care benefits, ending spousal and dependent coverage, and reducing the city share of premium contributions.

Shawn Duhamel - legislative liaison for the Retired State, County and Municipal Employees Association of Massachusetts, an advocacy group for public-sector retirees - said in a phone interview that the report’s recommendations are premature, because savings from recent municipal health care changes have not yet been realized.

For example, he said, the city of Lowell recently announced that workers will be joining the state’s Group Insurance Commission, a move allowed under the changes that will save the city $10 million in costs in the first year alone.

“The new law is working, but it needs time to take effect,’’ he said. “Let’s see where it goes before we get ahead of ourselves and pass draconian [measures] that are really going to hurt people.’’

Edward A. Kelly - president of the Professional Fire Fighters of Massachusetts, a statewide union - blasted the foundation report in a phone interview and said some members are paying as much as half of their health care premiums while on active duty.

He said his union wants to work with lawmakers to help reduce health care costs, but that city workers also believe they have the right to proper medical care and to “retire with dignity.’’

“When did that become a bad thing?’’ he said.

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