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WORCESTER — The public pension system cannot be sustained, but it can be fixed. That was the consensus of panelists this morning at a forum sponsored by The Research Bureau and the Rappaport Institute at Harvard's Kennedy School. The discussion was held at the Massachusetts College of Pharmacy & Health Sciences.
While the debate over public employee benefits has not been as rancorous in Massachusetts as elsewhere in the country, the state is grappling with the same issues, said moderator David Luberoff, executive director of the institute.
He asked: Can the state and its communities meet their obligations without raising taxes, cutting services or reneging on benefits?
J.P. Aubry, a researcher at the Center for Retirement Research at Boston College, said a survey of 126 state and local pension plans in the country revealed they will have $1 trillion in unfunded liability by 2013.
Before the economic meltdown, he said, there wasn't much concern about the issue, but now bond rating agencies are beginning to include pension liability in their analyses, which will affect borrowing costs.
"But the liability doesn't have to be paid off tomorrow," he noted, adding that most plans are solvent for the next 20 to 30 years.
He outlined several possible pension system reforms, including increased contributions from workers, increasing the retirement age and basing pensions on career average earnings versus final earnings.
Another possibility, he said, is "stacking" defined benefit and defined contribution pensions, so that workers above a certain salary would contribute more toward their retirement.
City Auditor James DelSignore said Worcester, which began its pension system in 1945 and has accrued unfunded liability since "Day One," now has $300 million in unfunded liability.
But he said public plans are not as susceptible to volatility as private plans, and he urged a long-term view of the situation, giving the markets time to even out.
"Just let it work," he said in a brief interview after the panel discussion. "The last decade was the worst since 1926. A lot of that liability is going to disappear."
In the panel discussion, Mr. DelSignore said Worcester would have earned $35 million less in investment income had it been forced into the state retirement system, as some local systems that didn't meeting funding requirements were made to do in 2007.
Stephen Lisauskas, a consultant for the Collins Center for Public Management at the University of Massachusetts at Boston, said solutions to the public pension problem will be expensive and will require "adult decisions."
"Something has to give," he said.
He pointed out that Massachusetts is in better shape than many states because of its funding requirements.
And he agreed with other panelists that pension liability is a long-term problem that can be solved by most systems.
From left to right
JP Aubry, Research Associate, Center for Retirement Research at Boston College; James DelSignore, Worcester City Auditor and Ex-Officio Member of the Worcester Retirement Board; David Luberoff, Executive Director, Rappaport Institute for Greater Boston; Roberta Schaefer, Executive Director, Worcester Regional Research Bureau; Paul B. Bear; Michael Mulrain, CFO of Polar Bevarages; and Steve Lisauskas, Associate, Collins Center for Public Management at UMass Boston’s McCormack Graduate School of Policy and Global Studies and former Executive Director, Springfield Finance Control Board