With the release of his FY04 budget, Governor Mitt Romney proposed reducing the state's pension appropriation by $180 million. Instead of appropriating $832 million in cash, Romney proposed transferring $652 million in cash to the system, while turning over another $180 million in undetermined surplus state property for the pension system to develop as investment property.

Later, when the Administration released its list of surplus properties, it was discovered that many were problematic in terms of being developed as an investment by the pension fund. Many may contain hazardous materials that could prove costly to remove, thus delaying development. Other sites are located in environmentally sensitive or historic areas.

House budget writers agreed with the objections raised by state Treasurer Tim Cahill and the Pension Reserves Investment Management (PRIM) Board and scrapped Romney's plan. Instead, House Ways and Means Chairman John Rogers fully funded the pension schedule at $832 million.

Instead of placing the appropriation under the state Treasurer's line item, as has been the traditional manner of funding, Rogers added a section to the House budget that moves the pension funding line item off-budget.

Rogers' move, sanctioned by House Speaker Thomas Finneran, requires that the funds needed for the annual pension appropriation be paid directly by the Department of Revenue, prior to tax receipts being made available through the General Fund. This move ensures that future funding requirements be made without annual attempts to reduce payments.

"Romney's scheme to transfer state owned land into the PRIT Fund instead of making the required payment was really the final straw. For the past five years, one Republican governor after another has attempted to play games with the appropriation," said Association President Ralph White, who is also an elected member of the PRIM Board.

"I have to give Tom Finneran and John Rogers credit. They both realize the importance of the state meeting its obligations to the pension system. We have been making real progress over the past fifteen years, it would be a shame to see all of the that hard work go down the drain."

In a move that can be viewed as a compromise between the Romney and House plans, the state Senate has proposed transferring ownership of the Hynes Convention Center and the Boston Common Garage to the PRIT Fund. Both valuable Boston properties would then become assets of the State/Teachers' pension system.

Under the plan, developed by Senate Ways and Means Chairman Therese Murray, the state would appropriate $687.335 million into the PRIT Fund for FY04. In order to fully fund the system for the coming year, another $145 million in property would be transferred - which is the estimated value of the Hynes and Common Garage.

Treasurer Cahill is said to be closely examining the Senate proposal. While the Common Garage may prove to be a sound investment, with a steady flow of cash generated from parking receipts, the future of the Hynes may be in question. Once the new convention center opens next year on Boston's waterfront, business for the Hynes will suffer.

"I see a significant difference between what was proposed by the Governor and what has now been proposed by the Senate. Turning over unknown properties that may have no investment value is quite different than the garage and the Hynes," commented White. "It is too early to say whether or not this is a good deal for the pension system. A lot of work still needs to be done, but it may be worth taking a look at."

With House and Senate conferees meeting in Conference Committee, as we go to press, it is unclear how the funding of the FY04 appropriation will ultimately be handled or what position Governor Romney will take once the budget is returned to his desk this summer.