Outrage, lack of fairness fuel debate over pension reform

People like Anthony Juliano and Leslie Covui have a stake in the debate over public pension reform now underway on Beacon Hill.

Not that they have state pensions. But the disparity between the retirement benefits of private-sector retirees like them and of those at the top of the state pension food chain is one of the things driving the debate. And its outcome will affect their lives and those of every other resident of the state.

Peabody resident Juliano, 68, retired four years ago for health reasons after 23 years teaching computer science at local Catholic high schools and 18 years before that at Honeywell.

He and his wife, Carolyn, depend on Social Security and modest pensions from the Archdiocese of Boston and Honeywell. Nearly all his wife's Social Security check is consumed by the couple's health care costs of $600 to $700 a month. That includes the cost of buying coverage to supplement Medicare | something that would have been part of his retirement package had Juliano taught in public schools.

"We don't go taking the trips like we used to take," Anthony Juliano said. "The cars stay in the driveway."

Covui, 75, of Beverly, spent his last 10 working years at Shaw's supermarkets. He and his wife, Louise, 82, live almost entirely off their Social Security income of less than $2,000 a month, he said. His supermarket pension provides him less than $50 per month.

"I just wish I started working for Shaw's earlier," said Covui, who retired at 62.

But Covui thinks the couple is "doing pretty good" after taking out a reverse mortgage that provides income that will be repaid upon sale of their home.

Reform on the table

Massachusetts politicians have created a public pension system widely criticized as unfair both to many of the people who depend on it and to the taxpayers who help pay for it.

The question now is whether they have the political will to fix it.

Some lawmakers say there is a growing appetite for pension reform, whetted by public outrage over pension padding by the likes of William Bulger. The average state pension is just over $27,000, but the well-connected collect six-figure payments.

Several issues are before legislators. What to do about loopholes that add to the state's $14.5 billion unfunded pension liability. How to pay for increasingly expensive health care for state and local retirees. Whether to reduce benefits as other states faced with the same problems have.

Rep. Brian S. Dempsey, D-Haverhill, former chairman of the House committee that considered pension legislation, said lawmakers could decide to cap future pension payouts before the session ends in December 2008. One proposal calls for limiting pension payouts to 400 percent of the state average.

"It would be a straightforward response to the concern the public has about pension costs," Dempsey said.

Sen. Susan C. Tucker, D-Andover, also sees momentum for change.

"We're moving in the right direction," Tucker said. "When politicians play games with the pension system, it feeds people's cynicism. There's a critical mass of legislators who want to see abuses curbed."

In July, the Legislature adopted a long sought reform, allowing Massachusetts to take over local pension funds whose investment returns lag the state's, sapping local budgets of money for schools and other services.

The Amesbury, Lawrence, Methuen and Peabody pension funds fall into that category.

Gov. Deval Patrick signed the measure into law last week. Patrick had filed a similar, but tougher proposal, calling for takeover of more local systems.

Passing even the weaker version wasn't easy, Tucker said, and shows how difficult reform will be.

"No one wants to give up their hand in the pension systems," she said. "People fight hard to keep their authority."

Michael Widmer, president of the Massachusetts Taxpayers Foundation, former Dukakis administration official and longtime Beacon Hill observer, could not remember the last major pension overhaul.

"It is always difficult to make sweeping changes in the pension system," Widmer said. "When you talk about significant change in pensions, you're talking about state workers and the Legislature."

Lawmakers and state workers have proven to be obstacles to change, Widmer said. He noted the Romney administration was never able to get the Legislature to increase state workers' share of health insurance premiums.

"You see how hard it is to make minor changes in health care contributions," Widmer said. "To make more significant change in pensions is a high hill to climb."

Rep. Jay Kaufman, a Lexington Democrat and House chairman of the committee that deals with pension legislation, is more optimistic about the prospect of reform.

"We're off to a great start," he said.

He pointed to lawmakers' creation of a $343 million investment trust fund that will help pay for future retirees' health care, a liability currently pegged at $13.3 billion.

But there is more to do, he said, ticking off a series of changes he thinks the Legislature will pass this session.

Lawmakers will be asked to consider basing pension payouts on salary alone, not perks | a reaction to the Bulger court ruling that counted the former State Senate and University of Massachusetts president's housing allowance as pay, raising his pension close to $200,000.

They also will consider recommendations by a blue ribbon commission they created last year. Those include reducing the number of job classifications to two | one for dangerous jobs and another for all others. There are now four groups, and they are open to manipulation by lawmakers to enhance the pensions of the favored. The blue ribbon commission also called for a temporary halt to special interest legislation that grants or inflates pensions to individuals or entire classes of workers.

Kaufman said his committee is already following those guidelines informally. His committee now requires representatives of professions seeking to be moved to a higher pension category to submit an estimate of what it would cost.

Some local lawmakers think the Legislature should go further.

Rep. Harriett Stanley, D-West Newbury, wants state retirement benefits to more closely mirror those in the private sector. Stanley would phase-in a new approach to pensions, with new state workers contributing more to their retirement benefits through a 401(k)-style plan while retaining a safety-net pension.

The state already has a deferred compensation plan, called a 457b, but only 56 percent of workers participate and there is no state match. Stanley thinks the state should consider some kind of a contribution to "match" those who save for their retirement in a 457b.

But Stanley said true reform of he pension system won't be easy. "Because it really is a sacred cow."

Unions divided

Some unions also want change.

David Holway, who represents 12,000 state workers as president of the National Association of Government Employees, said the Legislature especially needs to take a hard look at the pension classification system, which he considers unfair.

Many of the administrative workers Holway represents are in the lowest-ranking group, retiring later in their careers and with smaller pensions than others.

But he's not convinced the Legislature will reform that system. "I'm not sure anyone has the backbone to do this," Holway said.

Others are less eager for change.

The Legislature's blue ribbon commission suggested state workers with truly dangerous jobs should be paid more while they're working, instead of in retirement, as now.

But the State Police Association of Massachusetts, whose members can retire with full pensions as young as their 40s after 25 years of service, would oppose changes to the system.

John Coflesky, association president, noted that state police pay 13 percent of their salary into the fund | more than other state employees.

"We're trying to fix something that doesn't need to be fixed," Coflesky said.

Ralph White, president of Retired Massachusetts Employees Association, declined to discuss proposed reforms because he also sits on the state retirement board.

But he did say he doesn't believe special pension bills on behalf of individuals affect the pension system. "While politically it causes skepticism, it financially has no impact on the finances of the system because it only represents one or two people (at a time)," White said.

Resistance to sweeping change could also come from state lawmakers who put pension reform below other priorities.

"I don't think you'll see a groundswell," said state Rep. Theodore C. Speliotis, D-Danvers. "Most legislators, their first concern is winning re-election. They care more about Chapter 70 (local school aid) than about pension reform."

Kaufman said priorities can change.

"It's difficult to change behavior," Kaufman said. "But that's important to do."

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