The unfunded liabilities of the Massachusetts public pension system grew last year and reforms to ease the burdens had almost no effect, according to a study by a nonprofit group.
State and municipal retirement funds in Massachusetts had $146 billion in unfunded liabilities at the end of 2012, the study by the Massachusetts Taxpayer Foundation said. With $63 billion on hand, that leaves a gap of $83 billion.
Reform measures to lower benefits owed new workers were passed by the state legislature in 2011 and took effect in April 2012. They included raising the retirement age from 55 to 60. The expected savings were projected to be $5 billion over 30 years. The study said the saving this year totaled $500,000 in the fund for state workers.
The amount of unfunded liabilities has grown the report notes. For instance, the state’s funding gap for teachers and state workers was $3.5 billion in 2000. In 2012, it reached $21.5 billion. Municipalities saw the gap grow from $13.5 billion in 2000 to $14.7 billion last year.
The failure of the funds to meet annual return on investment targets of 8 percent to 8.25 percent and delays of governmental payments to the system contributed to the growing amount of unfunded liabilities, the report said. In a move to restrict short-term contributions, payment schedules were extended from 2018 to 2040. Delaying the payments allowed governments to keep cash in the short-term, but dramatically raised long-term costs, the study said.
Other factors that contributed to the pension funds problems include early retirement incentives and enhanced benefits approved by the legislature.
Retiree health care benefits add an extra burden on municipalities and the state. The cost of paying for benefits already owed is pegged at $46 billion, the study said. It called the benefits “exceedingly generous,” in allowing retirees hired before April 2012 to retire at age 55 and making them eligible for full benefits with 10 years of service time.
Pension problems and how to address them have roiled governments from California to Rhode Island. In some states, constitutional guarantees are obstacles to making changes to promised retirement benefits. Unions often fight changes to benefits they say were fairly negotiated under collective bargaining rights.
The Massachusetts Taxpayer Foundation stated purpose is to “promote the effective use of tax dollars.”