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Globe Editorial

Mortgaging the future

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May 29, 2008

STATE AND LOCAL retirees haven't had an adjustment to the cost-of-living formula in their pensions since 1997. They deserve a reasonable increase, but the state won't provide the money and municipalities can't afford it. The Legislature was wrong to resort to an accounting ploy that would burden a future generation of taxpayers.

The raise would amount to an extra $120 annually on top of the $360 raises that are routinely given each year. The new increase for state retirees and teachers would cost $110 million annually. Rather than appropriate the money, the House (with Senate concurrence) proposes to stretch out the time needed to fully fund the state pension plan by three years, to 2026. That is fiscally irresponsible, as state Treasurer Tim Cahill has rightly noted. To delay would increase the cost of paying off the pension liability and raise eyebrows at bond-rating agencies, which determine how much the state pays to borrow money. Cahill favors a raise using existing revenues.

Last week, the Senate performed its own bit of pension mischief. It approved a budget rider that would encourage cities and towns to provide cost-of-living increases for their own retirees. Local pension boards would have to approve them, as would another local governing authority.

Senator Marian Walsh of West Roxbury says she merely wanted to open a conversation on the issue, but, without further state aid, any discussion will quickly turn contentious. Unless local officials want to offend their retirees and their current workforce (the retirees of the future), cities and towns would have to find the money by stretching out their own pension funding, cutting services, or seeking a property tax increase.

If the Legislature wants to give local retirees a raise, it should provide the money directly. But the state can't afford that. There isn't even room in the budget for the extra $110 million for state retirees.

The decision to fully fund the state and local pension systems was made in 1988, one of the most fiscally responsible actions the Legislature has ever taken. There may be reasons to adjust the completion date depending on the returns on pension-fund investments, but the Legislature needs to resist delaying the date just because it has found immediate uses for the money. Other states, notably New Jersey, have raided their pension funds with dire results.

The House-Senate conference committee ought to remove these amendments from the budget. If they remain, Governor Patrick should use his line-item veto to excise them. The leaders of Massachusetts shouldn't fob off to the future, or to local officials, a burden they couldn't bear themselves.

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