Association Pitches Cola Solution

White: "Time Is Now To Increase Base"

OCTOBER 27, 2009: On Monday, Association President Ralph White proposed a sweeping cost-of-living-adjustment (COLA) reform measure to the Joint Committee on Public Service , which heard testimony on a litany of bills aimed at increasing retiree pensions.

While much testimony was presented on the need for a COLA base increase, White focused his remarks on a specific plan, formulated by our Association, which would incrementally increase the COLA base from the current $12,000 to a new $18,000 level. The increase would be rolled into the long-term pension funding schedules, which are about to be extended to accommodate fluctuations in the financial markets.

"The COLA has been my life's work for over forty-years. I
know many of our members are having a very hard time getting by, but it is not
enough to stand up and make the human arguments for a higher COLA base. For
now, I'll leave that to others," explained White. "The time is now to increase
the base. But this benefit is very expensive, so without a realistic plan on
how to finance the new base, it just will not fly. 

"This past summer the Pension Reform Commission examined
this issue, looked at our history and what is going on in other states. The
proposal submitted to the Legislature is for an $18,000 COLA base, reached
incrementally over the next few years. Realistically, this is what can be done
within the financial confines Massachusetts is facing."

White also presented the Association's plan last week to the
Mass Association of Contributory Retirement Systems. The annual fall conference
was held in Springfield and attended by several hundred retirement system
officials from across Massachusetts.

Under the Association's proposal, now being considered by
the Joint Committee on Public Service , (Chaired by Senator Thomas McGee and
Rep. Robert Spellane ) the state, teachers and local COLA base would be
increased to a maximum level of $18,000. Each of the 103 local retirement
systems would be given the local option to increase the base in $1,000
increments as deemed financially feasible for that retirement system. The
Legislature would establish a new base for state and teacher retirees based on
the same criteria.

"We've had uniformity with the COLA dating back decades. But
this is no longer a one-size-fits-all benefit. Some retirement systems are
capable of providing a higher benefit sooner than others," said White. "Like we
see with insurance benefits, there will now be a slight difference in the COLA
base, depending upon the retirement system to which you belong."

As stated in the Special Commission's report, Massachusetts
is one of only three states that do not provide an annual COLA based on the
full value of a retiree's pension. However, the Commonwealth was one of the
last states to establish a pension funding schedule (1988) and, as a result, is
saddled with large unfunded liabilities that must be paid off over time (as of
1/1/2009 the Commonwealth's unfunded liability was $22 billion, largely
attributable to the market losses in 2008).