Romney is expected to unveil a plan, that will make sweeping changes to the Chapter 32 defined benefit system, as part of his budget proposal for Fiscal year 2005 to be released in January. Originally, the governor had hoped to file plans to usher in a defined contribution plan last spring, but had to delay his efforts until now.

A defined contribution (DC) plan absolves the government from all responsibility of paying a post retirement pension. The employee contributes to his own personal investment plan from which he receives his retirement benefits. Unlike our defined benefit (DB) plan, there are no guaranteed contractual benefits in a DC plan.

What is most disturbing is the Governor's misleading and blatantly untrue rhetoric. Romney would have uninformed observers believe that the state's large $13 billion unfunded liability is the result of "bloated" pension benefits. In characterizing the state/teacher pension appropriation as a "budget bomb", Romney is trying to goad the public into supporting his master plan to end the state's longstanding DB program.

"The Governor is not telling the true story when it comes to pensions. The unfunded liability was not caused by benefits, but rather by the state's failure for over forty years to fully fund its pension obligations. Furthermore, Governors Cellucci, Swift and now Romney have each manipulated the pension funding schedule to fund their tax cuts and agenda," said Association President Ralph White.

"Just when the state had made real progress with finally funding our pension system, these three governors took us in the opposite direction. Another point, being ignored by Romney, is that current retirees, as well as employees, have contractual rights to the pension benefits they have earned. Those benefits can never be taken away, regardless of what future changes are made."

Observers of the pension system note that the state's unfunded pension liability will not be reduced by changing the benefits of future employees. Legally, the state must fund its accrued obligation to the pension system.

"We have been down this road before over the years with other governors. They come into office trying to save a quick buck by targeting the pension system, but quickly realize that their proposals make no sense or will in fact make the situation worse," continued White. "Studies have proven that most current employees, who are contributing 9% (11% on earnings over $30,000) towards their pensions, are paying for their entire pension benefit on their own. Romney really needs to get his facts straight before launching these attacks on our system."

One distinct danger looming on the horizon that could become a real problem for Massachusetts is mandatory coverage under Social Security. To date, the Commonwealth has been able to hold off efforts to force public employees into the federal retirement program.

The danger is that if the state were to transition from a defined benefit system into a defined contribution system, Congress may then require Massachusetts to enroll all new or non-vested employees in Social Security. A study by the Public Employee Retirement Administration Commission indicates that such a move would cost state taxpayers approximately $10 billion over ten years.

"Right now we are able to make the argument in Washington that our defined benefit plan offers a superior benefit than Social Security, thus preventing mandatory coverage. Any change to our system that does away with the DB plan could very well force the state into Social Security," says Association Legislative Liaison Shawn Duhamel. "Joining Social Security would spell disaster for everyone.

"First, the state would have to continue to pay off its existing unfunded liability, on top of its new obligation to Social Security. Anyone who has taken a close look at this knows it would be a financial disaster. I believe the Governor has not thought this through and is playing a very dangerous game."