Massachusetts Retirement Agency Concerned About Springfield Pension Fund
Red flags have been raised about the pension fund for public employees in the third-largest city in Massachusetts.
The state agency that monitors and regulates public pension systems in Massachusetts says it has “serious concerns” about the city of Springfield’s plan to reduce the large unfunded liability in its pension fund. The city’s pension fund is just 27 percent funded, the lowest of any municipality in the state. The city administration proposes to “aggressively” increase contributions to the fund in an attempt to catch up.
Concern about the city’s ongoing pension fund liability prompted a majority of city councilors, led by Tim Allen, who chairs the Finance Committee, to petition to postpone a final vote this week on the proposed city budget for the fiscal year that starts July 1st.
"Because once you see the numbers it might impact your thinking about what you would vote on in this coming budget," said Allen.
He held a meeting Thursday with the city’s top finance officials and members of the Springfield Retirement Board to review the plans to address the pension fund liability. The city’s chief finance officer T.J. Plante said the city proposes to increase contributions to the pension fund by 8 percent in the next fiscal year and by 14 percent in each of the following two fiscal years.
" Would we like to do more? Sure, but every dollar we put toward pensions is a dollar less that is not available for other core services of government," said Plante.
The Massachusetts Public Employee Retirement Administration Commission approved the new funding schedule, but in a letter to the city’s retirement board dated April 25th warned it had “serious concerns about the long term sustainability of the plan.”
City officials stressed that no current retirees’ pension is at risk because of the unfunded liability. The city has until 2040 to fully-fund the pension system under state law. The funding schedule adopted by the retirement board projects full-funding by 2034. But for that to happen the pension fund would need a 7.6 percent annual return on its investments and the city would need to avoid a spike in retirements.
Fifteen years ago, the city’s pension fund was nearly 55 percent funded. But then the fund took serious hits when a large number of employees accepted an early retirement offer from the city in 2002 and 2003, and the investment returns dropped to 2 percent in 2008.
Allen said he is concerned the city is “kicking the can down the road” and should perhaps look to make even higher contributions to the pension fund than proposed beginning in the next fiscal year.
" I am advocating for honesty and integrity in numbers and getting all of us on the right page, and then I am advocating for the question: how long do we put the whole thing off," said Allen?
Plante said the city’s pension fund problems are not new and he urged the council to stick with the funding scheduled proposed by the administration.
" We know this is a major issue and the administration wants to get on top of it and that is why we have adopted the aggressive funding schedule. It is something we can do over time and stay aggressive with it to make sure we are making the progress we need to make," said Plante.
Allen said he plans to schedule at least one more Finance Committee meeting on the issue before the council votes on Mayor Domenic Sarno’s proposed $616.8 million budget.
The council has scheduled a meeting on June 6 to vote on the budget.