As the governor proposes a state income tax increase to pay for education and transportation initiatives while the state struggles under an unfunded pension liability estimated at more than $23.6 billion, Swampscott Selectman Barry Greenfield is on a quest to change municipal pension plans at the grass-roots level, which he thinks will save hundreds of millions of dollars over the next two decades.
Greenfield is pushing a home-rule petition that seeks to give Swampscott the right to determine its own pension plan for employees, rather than being mandated to offer the state plan. He is working to build a coalition of officials from around the state to follow his lead in their communities.
“A lot of people are interested in seeing the language, and a lot of people are interested in supporting it,” said Greenfield, who is also founder of the website efficientgov.com, which he asserts is “the leading resource for aiding cost-effective local government.”
Under the terms of the pension plan currently in use, employees pay into their plan, and receive a fixed pension upon retirement, based on several factors including pay level and years of service.
“The problem is that people are outliving what the actuarial tables say,” Greenfield said, noting also that some people are retiring early and therefore receiving benefits for a longer period than traditional retirees. “Also, the entire pension system is based on an 8 percent investment return each year. When that investment return doesn’t reach 8 percent, the difference falls on the taxpayers.”
As a result, an unfunded pension liability must be paid by a municipality, said Greenfield.
In Swampscott, the total of unfunded obligations is $38.6 million, according to the Public Employee Retirement Administration Commission .
“When you look at Lynn or Salem, that’s $100 to $200 million,” Greenfield said, noting that the state has traditionally dealt with the issue by pushing back the date a municipality needs to fulfill its funding obligation.
“They want to give you more time to fund a system that really cannot be funded because it’s not set up to take into account the length of time that people are living now,” Greenfield said.
The home-rule petition Greenfield is proposing wouldn’t promote a specific option, but allow municipal governments, through collective bargaining, to offer new employees a different plan, such as a 401(k). Current employees would keep the state plan.
Swampscott’s Board of Selectmen has supported the initiative, including drafting the language, although it has not yet voted on whether to bring it to the annual Town Meeting on May 6.
“Companies in the private sector make changes that allow them to survive and thrive,” said board chairman Rich Malagrifa. “A lot of retirement plans have changed in the private sector, but us as a government, all we do is tax more. Eventually, the people who pay the taxes are going to say, ‘Wait a minute, maybe there’s something we can do about this.’ ”
Greenfield met last week with state Representative Peter Durant of the Sixth Worcester District, who is preparing his own legislation on the issue. Durant, a Republican from Spencer, said that if other towns join Swampscott in seeking change, it could bring more attention to his legislation.
“Once we build momentum, I’d like to think we can actually get something done,” said Durant. “Everybody needs to realize that this is unsustainable.”
In 2012, the state’s Public Employee Retirement Association Commission estimated the unfunded pension liability at approximately $23.6 billion. Changing the system is a complicated matter, and a national issue, said Joseph Connarton, the commission’s executive director, who thinks reforms made in recent years by Governor Deval Patrick and the Legislature will reduce the shortfall.
“I know we’re not where some people would like us to be, but we’re certainly far better than we have been in the past,” he said. “I think we’re on the right path, working on behalf of the taxpayers with the retirement system to improve them.”
Andrew Maylor, town manager in North Andover, worked with Greenfield when Maylor was town administrator in Swampscott.
Maylor, the former chairman of the board of directors for the Essex Regional Retirement System — which administers the public pension system for 19 towns in Essex County — likes some aspects of Greenfield’s initiative, but thinks the eventual best solution will come at the state level.
“I’m with them, but I would choose another methodology,” said Maylor. “I’m supportive of legislation that allows us to look at these more creative options. I don’t necessarily think the home-rule petition method is the way to leverage that.”