BOSTON — A plan to boost the pensions of Essex County retirees could cost cash-strapped cities and towns, including Rockport, Essex and Manchester, tens of thousands of dollars a year.
The Essex Regional Retirement Board pushed the plan, which would increase the annual cost of living adjustment given to the systems' 1,623 retirees.
The plan, signed into law by Gov. Deval Patrick yesterday, would be the first increase in the cost of living adjustment for Essex Regional retirees since 1987, but the proposal would cost 48 cities, towns and municipal authorities a total of $535,000 a year.
Timothy Bassett, executive director and board chairman, said it's a modest increase for retirees struggling to keep up with rising gas, oil and food costs on an average pension of $16,000.
"It's $5 a month, $60 a year," Bassett said. "That's not a lot of money."
Under the plan, the state would raise the base pay on which retirees cost of living adjustments are calculated from $12,000 to $14,000. So for retirees, they would get 3 percent on $14,000 instead of $12,000. The retirement board would be able to raise the base in $1,000 increments with the approval of a majority of the members.
Essex County retirees receive an average $16,000 benefit, and are not eligible for Social Security benefits unless they worked in the private sector.
Earlier this year, the Legislature rejected a plan to raise the pensions of 86,000 municipal retirees statewide, after the Massachusetts Municipal Association warned of the cost to struggling cities and towns. Local communities are similarly concerned about the Essex Regional plan.
North Andover, the system's largest member, would pay the most, $82,596. Town Manager Mark Rees said asking his town to pay more for anything is a worry.
"Obviously, we're always concerned when our costs go up for any reason," said Rees. "We have a limitation on our revenue sources. I can say a proposal like this would see a great deal of scrutiny before it's endorsed."
Bassett said financially troubled communities were considered. The amount on which pension increases are calculated could have been higher.
"It's only the first $14,000 because we thought it was affordable for the communities in our system," Bassett said.
Moreover, the cost will be offset by a 2 percent discount Essex Regional is offering communities that pay early, Bassett said.
The Essex Regional Retirement Board includes the towns of Boxford, Essex, Georgetown, Groveland, Merrimac, Newbury, Rowley, Salisbury, and West Newbury, as well as local housing authorities and school districts. Gloucester is not a member as it has its own pension plan.
Even with the governor's signature, the pension hike isn't a sure thing. Cities and towns still get to vote on whether to implement the plan.
After becoming law, the proposal would be vetted in public hearings across Essex County. It would then have to be sanctioned by a majority of the treasurers of the system's 48 members. Still, if a majority of communities approved the increase the rest would have to pay.
"It's majority rule," Basset said.
Rockport would have to kick in $28,755, Essex $9,279, and Manchester, $18,887.
Cities and towns could get relief. A provision in the bill would extend the time the Essex Regional Retirement Board has to come up with the money needed to pay all of its retirees. Right now, it has until 2028 but it would have until 2038 under the bill.
But that, too, has been criticized.
Steve Poftak, research director at the Pioneer Institute, a conservative think tank, likened the provision to mortgage payments. Extending the time to pay off the liability may lessen individual payments, but the additional accrued interest adds to the overall cost. Poftak said he doesn't have an issue with helping poorly compensated retirees but warned against raising cities' and towns' costs.
"These folks aren't getting rich," Poftak said, "but it comes with a cost." This isn't the first time the Essex Regional Retirement Board has sought a cost of living increase for its pensioners. The Legislature passed an identical bill in 2006, but then Gov. Mitt Romney allowed it to die without becoming law.
With a 2007 override, North Andover was able to stabilize its finances. But Rees warned new costs could tip a delicate balance.
"We're positioned well for the long term," Rees said, "but it doesn't take much to upset the apple cart."
Edward Mason may be contacted at emason@gloucestertimes.com.
