EagleTribune.com, North Andover, MA

Pension

July 30, 2007

Pension costs impose hidden fee on local homeowners

Gloucester High athletes will pay almost $230 to play football or baseball this year because school officials say they can't afford to pay for sports and meet all their other financial obligations.

Their parents will also pay a user fee of sorts, though most are unaware of it.

Built into their property tax bills, it's the hidden cost of pension promises the city made to its employees but can't pay without taxpayers' help.

As cities and towns across the North of Boston region struggle to pay for basic services, they are spending millions of dollars a year to shore up public employee pension funds that don't generate enough money to meet obligations to current and future retirees.

The cost to homeowners is measurable.

Gloucester, for example, pumped $5.2 million into its pension fund this year | money that could have gone to school sports and other services if the pension fund were self-sustaining.

The $5.2 million payment represented almost 6 percent of the city's entire budget.

Based on the average single-family property tax bill of $4,515, the impact fee for the pension debt was more than $260 for the typical homeowner.

Using the same formula, shoring up the local pension fund cost the average homeowner $283 this year in Salem, $271 in Newburyport, $213 in Andover and $199 in Haverhill.

And those figures don't include what health care benefits promised to retired municipal employees are costing local taxpayers. Nor do they include what it costs taxpayers to subsidize the pensions and health care benefits of retired state employees.



How we got here

For decades, cities and towns paid pension benefits out of their budgets each year | a pay-as-you-go system. As salaries rose and benefits increased, they amassed huge pension liabilities with no money set aside or invested to pay them off.

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