JANUARY 2000 - Original Law Passed In 1966 - As we close the door on the 20th Century, it is appropriate that we take a close look at the Commonwealth's pension cost-of-living (COLA) law and at the role that our Association has played in fostering COLAs since the inception of this law.

Massachusetts' original COLA law was sponsored by the Mass. State Employees Association (MSEA), an organization that no longer exists. It was drafted by an MSEA attorney named Mark Dalton.

The law, Chapter 661 of the Acts of 1966, provided for a consumer price index (CPI) COLA to be paid to retirees with pensions of under $5,000. Pensions over $5,000 received no COLA.

"Give the MSEA credit," said White. "They sponsored the original COLA legislation. We were chartered in 1968, but it wasn't until 1971 that we were strong enough to become recognized as the COLA leader."

In 1971 Chapter 1011 was passed, whereby all retirees became eligible for a COLA, with a base which limited that portion of a pension to which the COLA could be applied. The base at that time was $6,000.

Prior to 1976, COLAs were automatic. The percentage was based on the previous year's CPI. In late 1975, after an 11% COLA had been paid by all retirement systems, the Legislature and then Governor Dukakis repealed this formula, effective 1976. From that point on, the COLA percentage, if any, was determined by the Legislature.

Beginning in 1981, the provisions of PROP 2 1/2 required that any COLA mandated to local retirement systems by the state would have to be funded by the state. Prior to 1981 the state funded state and teacher retirees' COLAs while local governments were required to pay for city, town, and county COLAs.

Fast forward ahead to 1997 when Chapter 17 was passed, requiring local retirement systems to fund any new COLAs, with the state continuing to pick up the debt on all COLAs enacted between 1981 and 1996. The state's local COLA debt is currently $95 million.

Chapter 17, which was subject to local acceptance, required that the COLA would be 3% or the previous year's CPI increase, whichever is less. Chapter 17, which took effect in 1998, also raised the base from $9,000 to $12,000.

This year's legislation, contained in the FY2000 state budget (Chapter 127) requires state and teachers' retirement systems to pay a 3% COLA beginning July 1, 1999. The same legislation allows local retirement systems, subject to the law's acceptance by the local governing body, to also pay a 3% COLA effective July 1, 1999.

What this brief synopsis of COLA history shows is the major changes in the COLA law since 1971. What it does not show is the day-by-day, week-by-week, month-by-month, and year-by-year total effort and resources that our Association has dedicated to the COLA law since 1971 when we drafted, fought for, and won the bill which became Chapter 1011.

And since that time our Association has been responsible for every progressive change in the COLA law, most of which are not included in this synopsis. We should also add that we have defeated many regressive COLA proposals.

There are those, especially new retirees, who are critical of our COLA, feeling we really haven't done a very good job. But these folks weren't retired during the dark years when our pension system was truly in grave danger. It was our Association's lobby team, assisted by a core of very dedicated members, many of whom are now dead, who kept the COLA alive during that time. And again in the late '80s and into the '90s when the COLAs became sporadic because of the state's reluctance to pay for municipal COLAs, we suffered through some difficult years.

But we continued to work with the House and the Senate leadership toward a resolution. Recognizing our sincerity, the Legislature appointed our Association to a special House/Senate Committee on COLA reform. Chapter 17, which virtually guarantees an annual COLA, was a direct result of the work by the Committee.

By temporarily backing off from legislation which would create a higher base, but had little chance of passing, we were able to obtain a 3% COLA this year, more than double the scheduled 1.3% CPI. We will also be eligible for 3% again next year even though the new CPI will be 2.4%.

The higher base will eventually come, but in the meantime we can take pride in knowing that we were helping pensioners in the lower brackets, including widows, who received a 3% COLA on their full pension. And from another viewpoint, 3% on a $12,000 base is greater than the 1.3% CPI COLA would have been, for example, on a full $20,000 pension.

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Mass. Retirement Systems Cola Payments By Year (Click Here For Easy Printing Version)