Monday January 14, 2013

Governor Deval Patrick’s proposed legislation requiring higher health benefit payments for future state and municipal retirees will, by bringing those payments more in line with those of the private sector, bring down health care costs for the state in the long term. As part of the bargain with labor, however, the plan will crimp efforts by municipalities to reduce those costs in the near term.

The plan, reached following a study by a 12-member commission, recommends that the number of years an employee needs to be vested in the retiree health care system be raised from 10 to 20, cuts the state’s contribution to premiums, and raises the eligibility age for benefits from 55 to 60. The changes would apply for municipalities as well as the state. It is estimated that the savings would be as much as $20 billion over the next 30 years.

The commission found that Massachusetts has an unfunded liability for retiree health care and other non-pension benefits of about $46 billion, with $30 billion accrued by cities and towns that do not have nearly the resources available to cover it. According to data collected by the Boston College Center for Retirement Research cited in the report, Massachusetts retiree health care costs are among the highest in the nation. The state currently contributes 80 percent of the health care premium for vested retirees, which is far higher than that of the private sector.

The proposed recommendations are worthy, well-defended and should be approved. The problem is that they provide little or no relief within the next decade. While labor unions like the American Federation of Teachers support the changes, which will make it easier to get the legislation through the House and Senate, labor’s support came at a high price -- a provision preventing city and town officials from changing the share of the premiums their retirees pay through 2016. It is for this reason that the lone dissenting vote in the commission’s 11-1 vote supporting the recommendations came from the Massachusetts Municipal Association, whose executive director warns that the freeze on changes in premiums will deprive communities of a method of lowering retiree health care costs quickly in the face of budget challenges.

A one-year freeze could be included as a concession to labor but a longer freeze is too much to ask when workers in the private sector have little or no protection from higher premiums or other changes in health benefits. The Legislature should approve the governor’s proposal but without tying the hands of municipalities.