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MTA to testify at pension hearing

MTA President Anne Wass is scheduled to submit the testimony below to the Joint Committee on Public Service on Monday, Nov. 9. 

TESTIMONY OF MTA PRESIDENT ANNE WASS TO THE JOINT COMMITTEE ON PUBLIC SERVICE RE: REPORT OF THE SPECIAL COMMISSION ON PUBLIC EMPLOYEE PENSIONS

  November 9, 2009

Good morning. Chairman McGee, Chairman Spellane and members of the Public Service Committee.

My name is Anne Wass, President of the Massachusetts Teachers Association. It is a pleasure, once again, to be testifying before you today, this time, on pension reform.

At the outset, let me congratulate the Public Service Committee for its key role in the passage of pension reform legislation earlier this session. Thanks to your work, the abuses in the system are gone. With a few exceptions, what remains is a good system that we support.

In general, there are two observations I wish to make on the Special Commission’s proposals that are before you.

First, the application of some of the proposed changes would negatively impact new employees. MTA has 107,000 members all of whom, over time, will be replaced by new employees. During this transition of thirty years or so, if the Commission proposals are enacted, there will be a major disparity in the benefits earned by these new employees when compared with other teachers. They will be working side-by-side with and assuming the same responsibilities as their predecessors. This trend to treat new employees differently than their colleagues benefit-wise is not one that should be encouraged to continue.

Second, the Special Commission points out that while teachers contribute 11% of their salary, or 95% toward the normal cost of their pensions, the Commonwealth contributes just 0.6 of 1% of teacher salaries which amounts to only 5% of that normal cost. In brief, Massachusetts pays, as an employer, less than any state in the country toward normal teacher pension costs. This is in stark contrast with private sector employers and most states which match an employee’s 6.2% contribution to Social Security and contribute to an employee pension or 401k as well. 

Since new teachers will essentially be paying for their own pensions, we ask that Public Service reject Proposals 3 and 4 of the Commission Report. Proposal 3 would gradually reduce the age factors in computing one’s pension. Proposal 4 would increase the period for averaging earnings for benefit purposes from three to five years or by a factor of two-thirds. Such changes are neither beneficial nor needed when one considers that employers have an obligation to fund a fair proportion of their employees’ pension plans and especially in Massachusetts where public employer contributions are de minimus.

In addition, we ask that Proposal 28 that prorates retiree health insurance premium costs be rejected outright especially when this subject is outside of the Commission’s legislative charge to study pensions. Moreover, for many years, the state and local governments have been steadily increasing active and retiree premium shares, co-pays and deductibles.

Finally, while the Commission’s proposal to increase the $360 or 99 cents a day retiree COLA is a step in the right direction it is only that – “a step”. Instead we recommend that retiree COLAs be indexed gradually to approximate what Social Security does for its recipients. Currently, the maximum Social Security COLA is applied to a base of $27,876 at full retirement. Legislation (H2487) to do this is currently before the Public Service Committee and has been sponsored by 46 legislators.

Thank you for the time and consideration you have given me today. The Commission’s report contains valuable information that now can be found conveniently in one place and I thank each member of the Commission for his or her contributions. There are other important pension issues we will be discussing in the coming weeks with members of the Public Service Committee. For today’s hearing, however, time dictates our highlighting just a few themes and concerns relative to the 32 proposals contained in the Commission’s Report.  

Thank you.