The legislation, which came as a complete surprise to the boards, was included in a bill known as the RPatrick/Murray Municipal Partnership Act,S containing a series of initiatives aimed at Rimproving the financial health of the cities and towns and strengthening the partnership between local governments and state government.

With the CommonwealthUs $26.73 billion FYU08 state budget, due this July, short by over $1 billion, the Patrick administration has been seeking ways to allow cities and towns to raise revenue on their own. Included in the partnership bill was language that would allow communities to impose a five percent hotel room tax and a two percent restaurant tax. In addition communities would be allowed to transfer their employees/retirees to the CommonwealthUs Group Insurance plan.

But what grabbed the attention of retirement board members was the inclusion of language that would require retirement systems that are less than 80% funded and have under-performed PRITUs investment return by 2.5% over the last five years be required to transfer their assets to PRIT for investment.

PRIT, as you know, is the Pension Reserves Investment Trust, a $47 billion fund which is the investment fund of the State and TeachersU Retirement Systems. It also contains the pension funds of 70 local retirement systems, which have invested in PRIT as a local option. Twenty-nine of these systems, including most recently Middlesex, the largest, have turned all of their funds over to PRIT for management. The remainder of the 70 systems have continued to retain their own managers, but have transferred a portion of their funds to PRIT P which is governed by the nine-member Pension Reserves Investment Management (PRIM) Board.

In addition to the State and TeachersU Systems, there are 102 local retirement systems. Excluding the 29 systems that are totally invested in PRIT, there are 73 systems that are potentially facing a mandatory requirement to junk their own investment consultant and investment managers in favor of PRIT. Needless to say this has touched off a firestorm among their retirement boards and their legislative arm, the Massachusetts Association of Contributory Retirement Systems (MACRS).

MACRS President Tom Welch has declared the governorUs legislation to be an intrusion over the rights of local retirement boards. RMany (boards) donUt feel comfortable placing all of their money in the PRIT Fund,S he said. RThe Board members have a fiduciary requirement to the members of their retirement systems to be responsible for the investment of their contributions. Even though a large number of boards have invested in PRIT, they also have funds elsewhere and would be required to fire those managers, many of whom have performed well over the years.

Association President Ralph White has been an elected member of the PRIM Board ever since it was created on January 1, 1984 to oversee the PRIT Fund. He is the sole remaining original member of the Board and he has always championed the PRIT Fund. He is also a longtime member of the MACRS Executive Board and is MACRSU Legislative Chairman, seen by some as a looming conflict.

In my mind, thereUs no conflict,U said White. When PRIT was created, it was anathema to MACRS, a superfund that would swallow all pension funds of local and county retirement systems.RIn 1984 and every year since I have stood before MACRSU delegates at their annual conference and said, TNot so. ItUs not the PRIM BoardUs goal. I will oppose any takeover attempt.USWhite says, RIt was many years before the 102 boards trusted PRIM and PRIT, but over the past 10 years, I have witnessed the growing number of boards who have come to place some of their money with PRIT and even 29 who have gone all the way. And thatUs the proper route to continue to follow P a local option.

Even though I respect Governor  Patrick and want his administration to be successful, my word comes first. Regardless of the arguments that will come forward on behalf of the legislation, I am duty-bound to represent our many retirement systems in opposition to a mandatory requirement to turn all of their pension funds over to the state.

Unreasonable Parameters

The parameters in the proposed legislation are unreasonable, especially the 80% funding level, and for good reason. Funding levels are greatly impacted by each communityUs fiscal decisions. In a large number of cases, cities and towns have instituted early retirement incentive programs in order to avoid layoffs. The resulting implosion of retirees was a setback to pension funding schedules.

Communities undergoing a budget crisis have reduced or delayed their appropriation to their retirement boards in order to maintain necessary city services. ItUs a balancing decision P the community is appropriating sufficient pension funds to maintain its bond rating while at the same time keeping its fire stations open and streets plowed. Pensions are a contractually guaranteed benefit. In no instance are pensions ever endangered by these decisions.

MACRS Vice President Denis Devine, a member of the Woburn Retirement Board, agrees that retirement boards have been good fiscal partners in their communities.

After all, the city auditor or finance director is a member of the retirement board, and he or she is aware that the level of funding is not paramount when balanced against the cityUs overall ongoing obligation to its residents. Retirement board members are also good citizens,S said Devine.

Also, many boards have a different investment objective than PRIT. In some cases, they have not realized the investment returns of PRIT. Yet they and their governing bodies feel more secure in having local control. If the mayors and selectmen feel their pension funds should be switched to PRIT, they should talk with their retirement boards and express their opinion.

Reasonable people should be allowed to make their own prudent decisions. A state mandate is not the way to go.

RI am now also fearful that this represents a precursor of the dissolution of city and town retirement boards in favor of large regional boards, or even a statewide municipal board, with a resulting loss of the vital local personal services, which retirees and their survivors now enjoy.