GOVERNOR INCLUDES 3% COLA IN BUDGET

March 1, 2007: Governor Deval Patrick has included, in
his proposed Fiscal ‘08 State Budget, a 3% Cost-of Living Adjustment (COLA)
that would take effect this July 1 for retired state employees and teachers who
are eligible for the increase.

Also, the premium contribution rates for retirees, who are
enrolled in the state’s Group Insurance Commission (GIC) remain unchanged in
the governor’s budget. Those, who retired on or before July 1, 1994, would continue to pay 10% of the
premium, while those, who retired after that date, would contribute 15%.

If the COLA is contained in the budget’s final version,
state employees and teachers, who retired before July 1, 2006 will be eligible. The 3% COLA is currently
applied to the first $12,000 of one’s pension, for a maximum increase of $360
or $30 per month.

In his budget, Governor Patrick includes a number of
proposals relating to the unfunded liabilities associated with future retiree
healthcare costs. In brief, he proposes the creation of a State Retirees
Benefits Trust Fund, whose funds would be managed by the PRIM (Pension Reserves
Investment Management) Board and used to meet these unfunded liabilities.

Beginning this July, $380.52 million would be deposited into
the Trust Fund. There would also be a phase-in deposit of 90% of the funds
received by the state under its settlement with the tobacco industry,

In addition, a special study commission, on the state’s
liability for paying retiree healthcare and other non-pension benefits, is
proposed. This commission would report its findings and recommendations,
including any proposed legislation, no later than December 1, 2007.

As the next step in the legislative process, the governor’s
budget now goes to the House Ways
and Means Committee for its review.

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