BOSTON—The leaders of the Massachusetts political establishment proposed a second round of changes to the public employee retirement system on Tuesday, saying they are necessary for equity with private-sector workers and also to ensure the long-term solvency of the pension system.
Gov. Deval Patrick, Senate President Therese Murray and House Speaker Robert DeLeo said they planned to act this year on a bill that will increase the retirement age for newly hired state workers; discourage early retirements by lessening the benefit received; and also block "double-dipping" by prohibiting current and future elected officials from receiving a pension for a prior government job while serving as an elected official.
Discovery of that loophole triggered public condemnation that preceded the November suicide of Middlesex Sheriff James DiPaola. He filed for retirement to take advantage of a pension law allowing retirees to run for paid elective office without losing their pensions.
The late sheriff stood to gain an annual pension of $98,500 in addition to his sheriff's pay of $123,000.
"The problem was not created overnight and it will not be solved overnight," Patrick said as he stood with the legislative leaders, as well as Treasurer-elect Steve Grossman, outside his Statehouse office. "I support the defined-benefit program, but without these reforms, it is not sustainable."
The president of the largest union representing state, county and municipal workers sounded a conciliatory note.
"I think that the governor's plan is a jumping-off point for discussion," said David Holway, president of the National Association of Government Employees. "A lot of changes they are proposing would get us in line with the Social Security system. Nothing that's been proposed is shocking."
In general, the state has calculated a set, or "defined," retiree pension by factoring an employee's length of service against the average of his or her three highest salary years. Workers with hazardous jobs, such as police officers and prosecutors, are eligible to retire earlier than others.
The formula has prompted abuse by workers who accrue many years of service at low pay, then seek a high-paying job for just three years. That allows them to receive a benefit much larger than the contribution they made to the system.
State Police troopers, meanwhile, can receive their maximum benefit after 25 years of service, regardless of their age. Many take advantage of that to retire early, get health insurance from the state, and then launch second careers at full pay.
Under the proposal, the retirement age for most workers would increase from the range of 55-65 to a range of 60-67. For hazardous jobs, it would rise from 55-60 to 55-62. And state troopers would not receive the maximum benefit until 30 years of service.
Both Patrick and Murray, though, went to lengths to note that the average worker contributes 11 percent of his salary to the system and receives an annual benefit of $26,000. Those workers are not eligible for additional Social Security assistance -- even if they have worked second jobs.
"This is not an attempt to lessen or take away benefits from people who are hardworking," Murray said.
Officials estimated the changes could save $5 billion over 30 years, as well as save $2 billion in health care costs.
Grossman, who assumes office Wednesday, said the changes are necessary to maintain the state's strong bond rating. He also said it will also send a message "we have problems, we have challenges, we will deal with them boldly and aggressively."
While Patrick cast the changes, which follow a series of 2009 reforms, as evidence of "generational responsibility," the announcement coincided with another that the state is adding 15 years to its deadline for fully funding the retirement system. The system will now not have enough money saved to pay all its obligations until 2040.
The change will spare the state from making a $1 billion payment otherwise required in the coming fiscal year -- and also spare the public employee unions the likelihood of massive layoffs to cover that cost.
Asked how an extension squared with his words, Patrick: "That's about balancing the budget."
Administration and Finance Secretary Jay Gonzalez stepped in to say, "We just can't afford that in this fiscal environment." He said the system suffered big investment losses amid the Great Recession.
Gonzalez added: "But extending the schedule just makes the imperative for pension reform that much more important. We need to bring down the cost of our system to make it sustainable over time."