Governor Charlie Baker signed an early retirement plan Monday that will soon reduce the state workforce by up to 5,000 employees — a move that is expected to save money but quickly raised worries about an erosion of state services.
Though state lawmakers had expressed some initial skepticism, the House and Senate gave final approval to the proposal hours before the governor signed it. The votes were a victory for Baker and his effort to bridge a daunting state budget shortfall.
But advocates and analysts say the legislation sets up a new, perhaps more difficult challenge: keeping the government running effectively with many state employees hitting the exits at the end of June.
How well the administration keeps key parts of state government running with a sudden exodus of thousands of employees will, in large measure, determine how sustained Baker’s victory is, said Eileen McAnneny, president of the business-backed Massachusetts Taxpayers Foundation.
“The loss of the 5,000 state employees at once certainly poses some managerial challenges for the Baker administration,” McAnneny said.
Still, she said, the new law is a win for the governor because it is a major component of his plan to close the projected $1.8 billion budget shortfall in the fiscal year that begins July 1.
Noah Berger, president of the liberal-leaning Massachusetts Budget and Policy Center, said early retirement backers hope the state will be able to deliver the same quality of services with fewer people. But, “the question is whether the personnel loss will lead to things like shorter hours at our state pools and longer lines at the Registry” of Motor Vehicles.
A top official at the National Association of Government Employees, which represents thousands of Massachusetts state workers, said if reducing the workforce is necessary, then early retirement is a much less onerous way of reducing the workforce than laying people off.
But national president David J. Holway continued: “We just don’t know if the state will be able to deliver its core services once this thing shakes out. It scares us that all of that institutional knowledge will be walking out the door at the same time.” He offered the troubled Department of Children and Families as an agency that could be hurt.
Baker, who said he was “thrilled” with the Legislature’s speed on the issue, pushed back on those worries Monday afternoon, not long before he signed the bill into law.
“We’re going to make sure that the executive side of government continues to perform,” he told reporters at the State House. Baker added that the state has put early retirement programs into effect two other times in the past 20 years, “and state government continued to do the work of the people after that.”
House Speaker Robert A. DeLeo, standing next to Baker, said he believes the governor is right and “it will work out fine.”
Baker signed the bill into law Monday afternoon, according to a spokesman. It requires the administration to achieve payroll savings of at least $172 million, after accounting for some of the new pension liability and other costs, in the new fiscal year.
It allows the administration to do that through four savings measures: a pension-boosting early retirement incentive program; one-time bonuses to encourage retirement from people whose large pensions disqualify them from the program; a hiring freeze; and layoffs.
But the overwhelming majority of workforce departures are expected to come from people taking the early retirement deal, said Baker budget chief Kristen Lepore.
In a telephone interview, she underscored that the administration has been planning for months to ensure “disruptions are minimal.”
The law gives Lepore the ability to designate “critical positions,” which will not be eligible for early retirement or the other options. She said the administration is identifying those employees.
Lepore, who is the secretary of the Executive Office for Administration and Finance, noted that the law is similar to the one Baker proposed.
Among the changes imposed by the Legislature: the 5,000-employee limit on the number of workers who can take advantage of the law and changing the dates of when those who want to take the deal can apply (May 11 through June 12 and employees must have a retirement date of June 30).
While the legislation sailed through the House of Representatives, there was more significant pushback from the other chamber, where some senators worried the plan could gut specific state agencies.
Only a certain category of employees working in the executive department, a big part of the bureaucracy under the governor’s control, is eligible for the early retirement and other programs in the new law. Lepore said she expected roughly 10 percent of about 45,000 executive department employees to leave under the law.
The plan would boost pensions by crediting workers with up to five additional years of age or work. But it would be only for certain employees who are eligible to receive a state pension — those who have achieved 20 years of service or those who are 55 or older and have reached 10 years of service. They also have to meet other requirements. For example, their salary cannot be funded from a federal grant.
To lock in the savings, rehires for newly-vacant positions are capped.
Despite the cap, fiscal watchdogs reiterated concerns about the program’s long-term costs — the new pension liability is set to be paid over 15 years — and worries that savings will evaporate if too many of the positions are filled in years ahead.
Lepore has said the administration will stick to the cap and asserted Monday historical state employment data did not show a surge in hiring in the years after the most recent early retirement program.
But Jim Stergios, executive director of the conservative-leaning Pioneer Institute, said his group’s research suggests that early retirement plans have immediate benefits to the state’s bottom line but carry “troubling long-term tails.”
In an e-mail, he acknowledged the cap but said “long term — let’s say after this administration — it becomes really hard to enforce a ceiling like that. When you add in the pension sweeteners and retiree health care benefits, it can become problematic.”
McAnneny, of the Taxpayers Foundation, put it succinctly. “It only works if you permanently reduce the state workforce,” she said. “Time will tell. But that’s a tall order.”
Joshua Miller can be reached at email@example.com.