Legislature Approves 5% COLA With Local Option

Budget Measure Now Before Governor Baker

JULY 18, 2022: Late Sunday evening, House and Senate budget negotiators unveiled a compromise $54 billion FY23 State Budget. The measure contains a 5% COLA for retired State Employees and Teachers, as well as a local option provision authorizing the 102 local retirement boards to pay an FY23 COLA from 3-5%. The 3-5% increase for local retirement systems for FY’23 is an option, not a mandate. It allows them to give up to a 5% COLA this year if they so choose.

Scheduled to be approved by the full House and Senate on Monday afternoon, the FY23 budget will be sent to Governor Charlie Baker for final approval. The governor, who has 10-days in which to review the documents before acting, has three options available: 1) Approve the 5% COLA and local option sections (Sections 154 and 134 respectively); 2) Send one or both sections back to the legislature with amendment; 3) Veto one or both sections (Massachusetts governors have the line-item veto available when it comes to fiscal matters).

“First, I want to thank the House and Senate budget conferees for including the COLA increase in the final version of the budget. This is the largest increase in 30-years, and it will provide immediate help to those retirees struggling to make ends meet due to inflation,” said Mass Retirees President Frank Valeri, who is also an elected member of the State Retirement Board. “It is also important to point out that we would not be in this position today had it not been for the House leadership, from both parties, opting to make the COLA a priority for this budget cycle.

“This was in direct response to the case for COLA improvements that we began to detail late last summer. At that point two things were very clear. We knew that inflation had begun to spike, which would lead to retirees suffering. At the same time, we were amid one of the most successful investment periods in the history of public pension funding. This meant that the money to pay for COLA improvements is available within the pension trust funds.”

While the 5% FY23 COLA for State and Teacher retirees will be applied to the current $13,000 COLA base (maximum annual COLA of $650, which becomes a permanent part of a retiree’s base pension), increasing the COLA base will be considered as part of the Commonwealth’s pension funding schedule revaluation set to begin this fall. FY24 will mark the start of the new 3-year pension funding schedule for the State and Teachers’ Retirement Systems.

At the local level, the COLA base is set by the local 5-member retirement board in conjunction with the local legislative body.

“As much as we would have liked to increase the State & Teacher base for FY23, a change of that magnitude really must take place within the new valuation. Increasing the base to $16,000, which was our proposal this year, would add $1.5 billion in new unfunded liabilities to the pension fund and cost some $145 million a year toward the pension funding appropriation. However, by factoring in COLA benefits along with the system’s asset gains, new costs can be largely offset or paid for within the funding schedule without the need for new appropriations from the taxpayers.”

As mentioned above, the governor now has 10-days in which to review and act on the budget. While our Association has called on the governor to support Outside Sections 134 (Local COLA option) and 154 (5% State/Teacher Retirees COLA), members are also encouraged to contact the governor.

You can do so by phone or email:

Governor Baker’s Constituent Services Main Office (617) 725-4005

Click here to email.

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