Currently, Massachusetts is scheduled to pay $1.4 billion into the pension, an increase of $700 million from last year’s pension contribution and more than a third of the $2 billion shortfall that the governor is projecting for the overall state budget in 2005. Romney says delaying the current 2023 deadline to 2028 to shore up the pension would avoid the necessity of cutting state programs and services, by cutting next year’s contribution to $1.1 billion, according to a Boston Globe report.
The idea of moving the target date for closing the unfounded liability – the gap between the retirement benefits the state will owe its workers and the assets it has to pay those benefits – is not a new one for Massachusetts. State lawmakers set up the original schedule in 1988, after a report showed that the pension liability had grown by 57% in the previous five years, to $9.3 billion. By comparison, the unfunded liability now stands at $13.4 billion.
Originally, the debt reduction plan set a payoff target of 2028. During the economic boom of the 1990s, the Legislature moved up the target date to 2018, but when the economy slowed again two years ago, it pushed it back to 2023.
In addition to pushing the payoff date back to 2028, Romney wants to move the date the value of assets are calculated in the fund to October 1, instead of the usual January 1 date. Romney would also like to pay off some interest the fund owes.
Administration officials say moving back the deadline to 2028 will save $153 million, shifting the valuation date to October will save $110 million, and back loading the interest will save $30 million.
Romney’s plan though may not get off the ground, SenatorTherese Murray, chairwoman of theSenate Ways and Means Committee told the Globe. “Everyone would like to see $300 million, but are you going to steal it from the pension fund? That’s what corporate raiders do, not people who are fiscally responsible. Our children and grandchildren will be paying for it down the road.”