After hearing the Governor's hollow promise not to impact retirees with his proposed "reform" of the pension system, it was discovered that one key section of his pension changes would in fact have a disastrous effect on retirees.

The section in question would establish a requirement that any new benefits added to a pension system (state and local), including changes to the COLA base, must be fully paid for within three years of taking effect. For example, if the COLA base was increased by $3,000.00 ($12,000 to $15,000) the unfunded liability associated with the new benefit must be fully paid off within three years.

While the current pension law does require that all new benefits be fully funded, it allows for the liability to be spread out over the life of the funding schedule. In the case of the state and teachers' systems, the funding schedule runs through the year 2023.

By way of example, a $3,000 increase in the maximum COLA base would add approximately $50 million a year to the state's pension funding schedule. This amount would be paid over the life of the schedule, which in the case of the state is currently nineteen years. If the state were required to fully fund the new benefit sooner (within three years according to Romney) the annual cost would be enormous.

Despite the inclusion of the annual 3% COLA, for state and teacher retirees, in his budget, Romney's proposed funding method overshadows any good will that otherwise could have been extended to public retirees.

"In dealing with this Administration there is always a catch. The devil is always buried away in the details," said an angry Association President Ralph White. "To offer retirees a 3% COLA, while simultaneously derailing our hopes of raising the base is, at best, underhanded.

"We support full funding and understand the need to maintain a schedule, but it has to be done in a reasonable way. There is no way that the state or a municipality could fully fund a new COLA base over three short years. It simply is not possible."

In addition to Romney's pension proposals, the Governor has targeted the state-run retiree/employee health insurance plans.

As was the case last year, Romney is once again proposing higher contribution rates, upping the percentage for employees and also those who retire after June 30, 2004 to 25%. At first blush, it appears that our members have been left unscathed, as the Governor's proposal keeps the 90/10 and 85/15 contribution rates in place for those who retire before this July 1.

However, Romney is once again proposing carefully crafted changes to the Group Insurance Commission's pricing policies that could dramatically increase retirees' insurance premiums. He has included in his budget's rate setting language a convoluted section that appears to grant the GIC the ability to charge retirees and employees differing amounts, depending upon the insurance coverage that is selected. Currently, a retiree is charged 10% or 15% (depending upon date of retirement) of the total premium, regardless of the plan.

According to Association Legislative Liaison Shawn Duhamel, "The language, being proposed by the Governor, is a major departure from the standard budget provision that safeguards the retiree's premium contribution. In fact, it closely resembles the language that the Governor proposed last year, which would have done tremendous harm."

This new proposal would mark a significant change in the policy governing retiree health plans, in that the state may be allowed to contribute less than 90% or 85% towards a retirees insurance premium. It is believed that this move would allow the GIC to charge retirees substantially more for coverage under the indemnity plan than for the HMOs.

"Here we go again. The Governor obviously wants to have it both ways. He wants to claim to be holding retirees harmless, while at the same time saving a quick buck off their backs," said Duhamel. "This seems to be nothing more than a thinly disguised ploy to undermine the indemnity plan and corral retirees into what many consider to be an inferior managed care system."

In addition, Romney has chosen not to restore the reimbursement of the Medicare Part B premium, which was discontinued last year. Association lobbyists have been working to reestablish the reimbursement and codify the GIC's optional policy under state law.

"What angers me is that the Governor will not stop with his attacks on public retirees. He wants to limit our ability to raise the (COLA) base, while at the same time driving the cost of health insurance for our members through the roof," continued White. "Maybe it does not seem like a big deal to him, but in our world Romney's policies devastate people.

"Thankfully, the Governor does not have the final word. The proposal now goes to the Legislature, where we can deal with reasonable people who better understand people's hardships."