2007 JULY - $16,000 Base Would Be Indexed - In a bold move, the Joint Committee on Public Service favorably reported the Association’s marquis bill, raising the COLA base, to the Senate on May 14.The bill, now S2234, not only raises the COLA base for state and teacher retirees to $16,000, but also allows local retirement systems to increase the COLA base to any level above the current $12,000 by allowing for adjustments in the long-term pension funding schedules.

Committee chairmen Representative Jay Kaufman (D-Lexington) and Senator Ben Downing (D-Pittsfield) opted to tackle the complexities of raising the COLA base to a new level early in the new legislative session. The Committee’s April 5 public hearing on the COLA was purposely scheduled early in the session to allow the bill to be acted on without delay.<* /> Public Service members and staff took great care to collect a variety of opinions and background information from Association officers, labor leaders, retirees, and officials with the Public Employee Retirement Administration Commission (PERAC). As the state’s regulator of public retirement, PERAC conducted a study of the COLA base in 2005, which called for a new $16,000 base.

The study, which provided a key assessment of the financial implications and funding alternatives for raising the COLA base, was the result of a budget amendment filed by our Association in 2004 and supported by then House Speaker Thomas Finneran. Although a similar bill was discharged to the House last year, several key Senate leaders requested that this year’s proposal appear first before the Senate. The Senate’s Assistant Majority Leader Marian Walsh (D-West Roxbury) and the Chairman of the Health Care Financing Committee Richard Moore (D-Uxbridge) joined Senator Downing in calling for the bill to first visit the Senate.

Echoing those sentiments is leading Republican Senator Michael Knapik (R-Westfield), who, in addition to being a member of the Public Service Committee, is the ranking minority member of the Senate Committee on Ways and Means. Chaired by Lowell Senator Stephen Panagiotakos, the Senate Ways and Means Committee is the next critical step for the bill.

Unique Feature

While S1586 maintains much of the Association’s original proposal to raise the base to $16,000, it contains groundbreaking new language that indexes the base to the maximum Social Security benefit, while incrementally increasing the amounts over the coming sixteen years.

Under the Public Service Committee’s proposal, the maximum COLA base for state and teacher retirees would be set at $16,000. The base would be indexed to 65% of the maximum under Social Security until 2012, when it is again raised to 75% of the maximum benefit.

However, since the maximum Social Security benefit is based, in part, on the national wage average, it increases exponentially each year. In effect, the COLA base would automatically increase each year.

Then between 2016-2024, the base would rise to 85%, 95%, and then 100% of the maximum Social Security benefit. Beginning in 2024, the base would be set at 100% of the maximum, which would then increase with wage inflation going forward.

“This type of proposal is brand new to Massachusetts, and I give the Committee credit for seeking new ways to raise the base. A lot of work still needs to be done and the costs need to be borne out, but this is a good start,” said Association President Ralph White. “The biggest challenge going forward is that our Massachusetts retirement systems are not pay-as-you-go systems. New benefits have a cost and those costs must, by law, be accounted for.

“It is not as simple as just selling a higher base to the Legislature. We must take this proposal to all 104 local retirement systems, which must then get it approved locally. Each city and town has local autonomy; therefore, the state cannot mandate new benefits upon the local systems.

“However, our local members have my word that every effort will be made to allow for local retirees and survivors to have the same COLA benefits as state and teacher retirees receive. Whatever plan eventually becomes law, it must keep our local retirement systems in mind.”

Joint Effort

The Public Service Committee staff gave credit to Sean Neilon, of the Teachers’ Retirement Board for suggesting an adjunct to a $16,000 COLA base that allows for continued base increases. “Sean suggested a formula which utilized Social Security as an index for adjusting the base in future years,” said Patrick Charles, research director and general counsel of the Public Service Committee. Neilon is the assistant executive director of the Teachers’ Board. “The Public Service Committee recognized that a $16,000 base was a good starting point, but was also looking to the future. The Committee members and staff were open to suggestions at all times. Sean Neilon’s proposal was both practical and uncomplicated,” said Ralph White. “The apple doesn’t fall far from the tree. Sean’s dad is a retired firefighter and longtime chairman of the Lawrence Retirement Board.”

White was quick to acknowledge several other organizations who have been actively pushing for a higher COLA base. “The MTA, REAM, AFT, Mass. Retirees United, MACRS and the Firefighters, among others, have been very much involved. We have many dual members within our organization, which we’ve always encouraged. Jack Flanagan of the MTA has been a constant presence at the State House on behalf of this bill. We’re involved in a marathon with this legislation. It will take time and need all the help we can get.”