LAWRENCE – The city is $204 million short of what it needs to pay its pension obligations, making it the third most underfunded system in the state, according to a recently released report by a public policy think tank based in Boston.
“In terms of funding levels, Lawrence is 103 of 105” among public pension systems in Massachusetts, said Iliya Atanasov, a finance specialist at the Pioneer Institute who co-wrote the report. “This should be very concerning to employees and taxpayers who are supposed to fund the difference. As we’ve seen from Detroit, a large part of Detroit’s debts and liabilities came from under-funding its pension plans.”
Detroit declared bankruptcy on July 18, the biggest United States municipality ever to do so. The size of its unfunded pension obligations is disputed, but may be as high as $3.5 billion.
In Lawrence, the Pioneer Institute also warned that the city has given itself “little breathing room” to meet the 2040 deadline the state set for all public pension systems to be fully funded. Lawrence projects it will be fully funded by 2038.
The good news for Lawrence is that its pension fund earned a 14 percent return last year, increasing its balance to $140 million. Investments by the Lawrence pension fund are managed by the state, which took over the assets of under-performing public pension funds around Massachusetts after the 2008 stock market collapse devastated most of them.
Despite the double-digit returns Lawrence’s fund has earned most years since then, its $140 million balance covers just 39 percent of the $336 million it needs to pay its pension obligations for current and future retirees. That’s down from 49 percent in 2009.
Only Springfield and Everett are more underfunded.
The Pioneer Institute gave Lawrence’s pension fund a grade of “F” for its low balance compared to its obligations, and another “F” for the 25 years it says it will need to become fully funded. The agency gave the city an “A” for its earnings last year, which doubled projections.