Originally published at Forbes.com on August 19, 2021.
23 out of 40 Massachusetts state senators support it by signing on as co-sponsors.
126 out of 160 Massachusetts state representatives have done the same.
But the legislation, a bill to pay a bonus retirement credit to in-person public workers in that state, is still a terrible proposal.
The text of the bill, H. 2808/S. 1669, is brief. All employees of the state, its political subdivisions, and its public colleges and universities, a bonus of three years “added to age or years of service or a combination thereof for the purpose of calculating a retirement benefit,” if, at any point between March 10, 2020 and December 21, 2020, they had “volunteered to work or who [had] been required to work at their respective worksites or any other worksite outside of their personal residence.”
During a hearing on July 21, sponsor Rep. Jonathan Zlotnick explained his purpose in bringing the bill forward:
“This was the time when these essential services were most important, the people being asked to perform them were most at risk coming into contact with members of the public and with co-workers. They continued to do their jobs, often exhibiting flexibility and creativity and an effort to ensure that those needs were met. It is in recognition of that effort that we offer this bill.”
However, at the time, Rep. Ken Gordon “questioned Zlotnik on whether or not a financial or fiscal analysis had been conducted relative to the cost that would be incurred if the legislation was signed into law,” and Zlotnick admitted that no such calculation had been made, and “Zlotnik said he recognizes that many details associated with the proposal still need to be contemplated.”
In subsequent reporting, government watchdog group The Pioneer Institute voiced its opposition. In a statement posted on their website, they criticized the broad coverage — acting as an unfunded mandate for municipalities, including workers even if they had worked outside their home for a single day, encompassing both blue collar and white collar workers. They estimate the bill’s cost at “in the billions of dollars” and point to a massive boost even for a single individual, the president of the University of Massachusetts, whose lifetime pension benefit would increase by $790,750.
In response to these objections, Zlotnik “said the bill is still ‘very early in the process’ and said cost would be a ‘major determining factor’ in any bonus payout to public workers, in an e-mail to the Boston Herald.
And left out of Zlotnik’s proposal is a recognition that the state’s main retirement fund is 64% funded, and the teachers’ fund, 52%, as of 2019.
Now, whether this bill ultimately becomes law is still unknown. But, again, 79% of Massachusetts state representatives are on board with their support without taking any interest in the cost of the proposal, and even Zlotnik himself is not troubled by having brought forward a bill with such serious deficiencies. It is not even clear whether he would have pursued any cost analysis, had he not been called out on this. What’s more, nowhere in any of the discussion does Zlotnik or any of the bill’s supporters suggest that among the revisions would be any notion that the state should pay for the added cost up-front.
In fact, regardless of one’s opinions on the various proposals to give teachers, for instance, bonuses for their year of remote teaching, it is nonetheless a far more fiscally responsible choice to make, than this proposal, which is no different than borrowing money for the same purpose. And, again, 126 state representatives and 23 state senators were willing to sign onto this because the symbolism of the gesture was more important than assessing whether it was a financially responsible decision. Will those sponsors be willing to vote down the measure? Will those in power recognize this would be an embarrassment and simply never bring the bill to a vote? One way or the other, this is a prime case study in how pensions become so underfunded, as it is always far more popular to promise benefits than to pay for them.
Update: as of December 2024, this bill was reintroduced in 2023, and as of March 2024, is sitting in committee.
December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.
Defined benefit (DB) governments retirement programs with very few exceptions have been a failure and this article is one more example. DB programs have the one thing which is completely inconsistent with a sound retirement program: SPIKING! This article has just one example. DB programs are both a very bad plan and open the way for very bad people (legislators and other political types) to game the program with spiking.
Much like Captain Renault in Casablanca the author is shocked, shocked that there is no provision in the bill “that the state should pay for the added cost up-front.” That is simply just not part of a DB plan. There never was any connection between benefits in a DB program and payment for them. Benefits are allegedly being paid for by design over the next 20 or more years after accrued.
The game is rigged when benefits are based on how much you can game the program by spiking. Regular folks with the lower paid jobs are taking it on the chin. They do not get near the spiking which the six figure big shots do and who really have the super spiked pensions.
And, how is spiking paid for. Most spiking is done the last 3 or 5 years of employment depending on whether the pension is based on the High 3 or High 5. Many times it is done on the last day by taking unused sick, vacation, and leave time in a lump sum. As mentioned above, DB pensions are supposed to paid over the next 20 year and by a formula which no one understands and phony numbers are used by the crooked politicians with the biggest spiked pensions.
In contrast at the University of Kentucky and University of Louisville there are defined contribution (DC) individual retirement accounts with a choice to invest in funds with Fidelity or TIAA CREFF. Then on retirement there is a choice to buy an annuity with TIAA CREFF including one with an increment. No Kentucky politician has ever got to UK and U of L and told their employees they should be transferred over to the DB state programs. An Olympic gold medal fencer is at U of L. Imagine what she would do to such politicians.
This bill WOULD cost billions, but not one dollar more than the regular cost of state employee retirement pensions will cost anyway. The pensions will HAVE to be paid eventually. Allowing employees to leave 3 years early FROM THIER OWN retirement date would actually cost LESS. 1) employees who replace those retiring will pay a much higher amount into the pension system than those leaving, and 2) these retiring employees may NOT EVEN BE replaced at all- and savings will be by attrition. The genius part of this bill is that it is not a budget nor a pension buster because it’s not an immediate retirement bill. Some employees will be eligible to retire now, some not for 30 years! Completely spread out. Pay no attention to the dour nonsense of the feckless “Pioneer Institute” – they, like Mikey from Life Cereal- hate everything.