The Pioneer Institute, a Boston public policy think tank, issued a report recently on public employee pension funds in cities and towns across the state. It is not a pretty picture.
Public pensions in Massachusetts are woefully underfunded. As of 2010, the total public employee pension obligation — the amount that has been promised to public employees — was $92 billion. But the amount available in public pension funds to meet those obligations is short by nearly $31 billion.
State law requires that public pensions be fully funded by 2040. If the rate of return from pension fund investments does not meet their often overly rosy forecasts, taxpayers will be left to make up the difference.
The problem stems from the “promise them anything” mentality in negotiating labor contracts with public employees. When one set of public employees — the municipal leaders — is negotiating with another set — the unions — who is looking out for taxpayers’ interests?
Then, having given away the store at the bargaining table, elected leaders betray the public again by failing to set aside the money necessary to cover the cost of their extravagant promises.
Andover’s pension system received a composite grade of “D” because it was only 50 percent funded last year and the town says it will need until 2040 to fully fund it, according to the report.
Next door, Lawrence, where the pension shortfall is $204 million, is listed as the third worst of the 105 public pension systems in the state, earning a grade of “F.” Lawrence has just 39 percent of what it needs to cover its obligations. Only Springfield and Everett are worse.
These pension shortfalls are a sword hanging over the heads of taxpayers. If the economy remains stagnant or worsens, the rates of return on investments on which these projections depend may not pan out. This system is unsustainable and may drive some municipalities into bankruptcy. Taxpayers cannot continue to foot the bill for such irresponsibility.