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State officials wary about early retirements

Plan to ease budget gets mixed reaction; DeLeo is cautious

House Speaker Robert DeLeo said he wants to study Governor Charlie Baker’s plan.
House Speaker Robert DeLeo said he wants to study Governor Charlie Baker’s plan.Jonathan Wiggs/Globe Staff/File

A top legislative leader and a top union official expressed apprehension Monday about Governor Charlie Baker’s plan to entice thousands of state workers to retire early. Meanwhile the state treasurer said many questions remain about figuring out the long-term costs of the pension-sweetening program, which needs a green light from the Democratic Legislature.

House Speaker Robert A. DeLeo said he wants to study Baker’s plan but added that similar programs proposed in the past did not make the grade because they were “not in our best fiscal interest” over the long term.

DeLeo added that Baker’s bill may work — and he is hopeful it will — but “the devil will be in the details” regarding the program’s savings. The administration projects those to be a net of $178 million in fiscal 2016, at a time when Massachusetts could be facing a $1.5 billion budget shortfall. It estimates 4,500 state employees would take advantage of the offer, and Baker’s budget chief, Kristen Lepore, has threatened layoffs if the savings do not materialize.

A top official at the National Association of Government Employees, a union that represents about 21,000 Massachusetts state employees, had both praise and worry about the plan, which would be open only to employees in the executive department — a broad swath of the bureaucracy — who meet certain eligibility requirements.

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“If the governor believes that the only way to meet the budget shortfall is to cut the workforce, this is a very humane way of doing it and I applaud him for it,” national president David J. Holway said.

But, he added, “I just don’t know if the Commonwealth can fulfill its mission without backfilling a lot of those positions.”

“We’re just a little bit nervous about performing the core functions of government,” he said.

The administration has said the plan accounts for backfilling a number of newly vacant positions whose compensation costs equal no more than 20 percent of the gross savings from the early retirements. But that would still leave a lot of empty seats.

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Asked about the potential loss of institutional knowledge, Lepore said Sunday the state has a big workforce, the departures wouldn’t happen all at the same exact time, and the state has weathered early-retirement programs before and government kept running.

The most recent early-retirement program was passed into law in 2003, according to the Baker administration.

Eileen McAnneny, president of the business-backed Massachusetts Taxpayers Foundation, said at first glance, the plan appears reasonable.​

“It is voluntary, applies only to the [executive] branch, and probably allows the administration to save programs that might otherwise have to be cut,” she said in an e-mail.

Lepore emphasized Monday that the bill, which would make the prospect of retiring in the next few months more palatable by offering workers a chance to boost their pensions by crediting them with up to five additional years of age or work, is fiscally responsible.

The administration estimates the program would generate $325 million in gross savings in the new fiscal year, which begins July 1. But it subtracts the costs of backfilling some of the newly vacant positions and benefits for new hires.

Additionally, it accounts for paying out accrued vacation and sick days of those choosing early retirement, but over four fiscal years, instead of one, to spread out the cost.

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And the administration also subtracts a payment to defray the new pension liability from the estimated savings, effectively, it says, paying for the additional pension costs with some of the freed-up money from the reduced payroll.

“Once we do that, it’s basically baked into the base on a go-forward basis and would be presumed to be funded every year going forward after that,” Baker told reporters Monday.

But the administration’s math sets the state on a trajectory to pay off the new pension liability from the early-retirement program over 15 fiscal years.

So what if a future governor fills all of the vacated positions, essentially undoing the payroll savings?

Baker, who is set to file his budget plan for the next fiscal year along with the early-retirement bill on Wednesday, let out a sigh.

“Look, you’ve got to be disciplined about the way you deal with the state’s payroll,” he said. “And, clearly, one of the things we’re going to want to be is disciplined.”

Lepore underscored his point and added, “Certainly we can’t control what future governors do.”

Treasurer Deborah Goldberg, a Democrat who oversees the state retirement board, emphasized the unknowns in trying to determine if Baker’s plan would increase the state’s unfunded pension liability.

Goldberg suggested the proposal’s form could change in the Legislature. And, she said, it is unclear how many state employees might take advantage of whatever bill passes, if one does.

“Until we have real data,” she said, “it’s impossible to tell.”

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Miller can be reached at joshua.miller@globe.com.