Panel: Public Pensions Need Reform

Originally published in the Worcester Business Journal

May 11, 2011
Matt Pilon (Staff Writer, Worcester Business Journal)

A panel of retirement-benefit experts gathered in Worcester this morning concurred that the public pension system in Massachusetts is unsustainable, but fixable.
"We're not Wisconsin or New Jersey, but the fact is we are wrestling with the same issues," said David Luberoff, executive director of the Rappaport Institute for Greater Boston at Harvard University.
Luberoff, who moderated the discussion, was joined by James DelSignore, Worcester City Auditor and Retirement Board chairman; Stephen Lisauskas, associate at the UMass Boston Collins Center for Public Management; and Jean-Pierre Aubry, assistant director of state and local research for the Boston College Center for Retirement Research.
The panel was organized by the Worcester Regional Research Bureau and was held at the Massachusetts College of Pharmacy and Health Sciences on Foster Street. The WRRB issued a report on Worcester's pension system in 2009, characterizing it as too expensive and prone to abuses.
The four panelists said that reforms, and likely painful ones, are needed to ensure the viability of state and local pensions systems here.
"The money has to come from somewhere," Lisauskas said. "The solutions will be expensive and will require adult decisions."
Nationwide, there is a roughly $1-trillion gap between what public pensioners have been promised and what pension systems have saved up, according to the Pew Center on the States, a division of The Pew Charitable Trusts. Massachusetts is facing an approximately $20-billion unfunded pension liability.
Possible solutions suggested by the panel included pension systems paying their full required contribution, increasing the retirement age and reducing the potential for abuses.
But there was also good news this morning from panelists, who said that Massachusetts laws that require municipalities to pay down their unfunded pension liabilities each year put the state in far better condition than some other states in the country.
Aubry said that pension plans in Massachusetts have another two to three decades left in them before they go broke.
"Solvency is not an immediate issue," Aubry said. "Liabilities don't need to be paid off tomorrow."
DelSignore, the city's auditor, railed against "heat of the moment" legislation that was passed in the wake of the 2008 financial collapse that requires underperforming pension funds to be rolled into the state's pension plan. Worcester's fund was not among them. It has outperformed the state fund for the past three years, DelSignore said.
He argued that legislators need to look at the financial markets in historical perspective, noting that the S&P 500 has averaged 10 percent growth per year since 1926.
"Just let it work," DelSignore said.
A previous version of this story incorrectly identified the organization that calculated a nationwide unfunded pension liability of approximately $1 trillion. The organization is called the Pew Center on the States, a division of The Pew Charitable Trusts.

Pensions panel in Worcester

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