Sweet deals for some

By Edward Mason
THE EAGLE-TRIBUNE (NORTH ANDOVER, Mass.)

August 02, 2007 11:59 am

— David San Antonio died in 2004 of a rare genetic disorder that left him blind and wracked with tumors.
Those who knew him say that before he died, the 38-year-old Methuen, Mass., police officer accidentally checked the wrong box when filing for his city pension, leaving his widow and two children without benefits.
J. Michael Ruane was a Democratic state representative from Salem, Mass., for 30 years, much of it on the powerful House Ways and Means Committee. He never contributed to the state pension fund nor filled out retirement paperwork. But as he neared death, Ruane asked friends in the Legislature for a pension that would benefit his widow.
Both cases went before the Legislature last year. The Beacon Hill insider got a break but not the local police officer.
In the closing days of their session last July, lawmakers rushed through special legislation giving a pension worth $33,000 a year to Ruane’s widow, over Gov. Mitt Romney’s veto. For the second consecutive legislative session, it let the San Antonio bill lapse.
“They took care of Ruane but didn’t take care of this young person,” said Kenneth Henrick, a former Methuen city councilor who fought for the San Antonio family.
The contrast, critics say, is emblematic of the Massachusetts public pension system — open to abuse by lawmakers who exploit loopholes to benefit well-connected friends and special interest groups — and often themselves.

Deals cost billions
The special deals come at a cost to taxpayers. A Pioneer Institute study estimated the price tag for loopholes in the law at $125 million last year — on top of the more than $1 billion taxpayers paid into the system to make up for shortfalls.
Kenneth Ardon, author of the study and a Salem State College economist, estimates $3 billion of the state’s roughly $14.5 billion unfunded pension liability can be attributed to early retirement and other deals for those in favor with legislators, including members of powerful public employee unions.
The “Retirement Plus” plan alone cost $1.2 billion, he said. Billed as a way to older, higher paid teachers to retire early, it also enhanced the pensions of teachers statewide.
“It means a chunk of money in the future that could have been used for something else goes to pensions,” he said.
Ardon said the system has been so skewed there is no clear relation between what employees pay into it and what they ultimately receive. Some state employees actually get less than the value of their investment, while others get far more.
“There is a disconnect,” said Ardon. “What you put in doesn’t connect with what they pay out.”

The class system
Different rules for different state workers are one reason for the disconnect.
Massachusetts divides jobs into four groups. Most employees — administrative, clerical and technical workers — are in Group 1. Groups 2 and 4 cover more hazardous jobs — or jobs classified as hazardous. Group 3 is for state police.
Workers in Groups 2, 3 and 4 can retire earlier and earn more money than others.
One example is Haverhill Conservation Officer Mark Sheehan. He is the only conservation officer in Massachusetts who is a Group 4 employee.
Sheehan said he belongs in Group 4 because he can make arrests and traffic stops and carries the same service pistol as Haverhill patrolmen, a Glock 40.
“I do the same job as a police officer or the state environmental police, and they’re also Group 4,” said Sheehan, who trained at the state police academy. “There’s nothing underhanded or improper about this job being Group 4.”
Sheehan said his unique status dates to 1987, when the city petitioned the Legislature to designate the position as Group 4. Two former Haverhill conservation officers, Stephen Wydola and Brian Carifio, have already retired as Group 4 employees, he said.
Sheehan said it makes sense for him to have police powers because his job takes him from urban neighborhoods to deep woodlands within the city’s borders.
The Pioneer Institute cited Sheehan’s case in its pension report. Steve Poftak, Pioneer’s research director, said the institute was not aware Sheehan has police powers, but he stood by its report.
“The point is he’s the only conservation officer in the entire state who’s mentioned in the statute, and the law should be consistent,” Poftak said. “If he’s doing more than all the other conservation officers, than he probably should be compensated for that in his salary rather than his pension.”
Based on his current salary, Sheehan is entitled to a pension of about $39,000 a year at age 55, almost $16,000 more than if he were in Group 1 like other conservation officers.

The final bump
The inequities are made worse by the way pensions are calculated — using an average of the three highest yearly salaries, rather than the average of a lifetime of work.
The method entices people intent on bolstering their retirement income to wild, late-career abuses, Salem State’s Ardon said.
Brockton police Patrolman Charles Bradshaw Lincoln, for instance, padded his income with a second job at the Plymouth County Jail between 2001 and 2004, according to a state inspector general report.
Holding two public jobs for three years boosted Lincoln’s pension from $69,000 to almost $140,000 a year when he retired at 62.
Lincoln was able to hold two full-time jobs by calling in sick more than 250 days at one job or the other. He was charged with fraud but was cleared in June after other Brockton officers testified it was common practice to use accumulated sick days as “personal” days when approaching retirement.
Another quirk allows people to “buy” credit for years they never worked for the state or local government, in return for payments equal to what they would have paid into the pension fund at the time. While the state charges interest, it is nowhere near what the pension fund would have earned had it collected the money annually, invested it and received a conservative return, Ardon said.

The gold rush
Early retirement incentive plans approved by the Legislature in 2001 and 2003 were advertised as a way to save money on payroll at a time the state was in recession.
About 7,500 employees took advantage, cutting payroll by an estimated $400 million a year, according to the Pioneer Institute study. But the savings were less than met the eye because some workers would have retired anyway, without incentives, and some of the jobs were quickly “backfilled.”
In addition, many who took the buyouts were young enough — in their 50s — that the short-term savings were erased by the long-term costs of their retirement benefits. The Pioneer study said the early retirement plans could increase benefit costs by $1 billion over 30 years.
Lawmakers have their own loopholes.
State law allows elected officials who work a single day in a calendar year to take credit for a full year of work. So when state Sen. Cheryl Jacques took another job in November 2003, she didn’t resign from the Senate until January 2004.
In the most notorious case, William Bulger, the former president of the state Senate and the University of Massachusetts, went to court to argue his housing allowance and annuity should count as pay — not perks. The state Supreme Judicial Court agreed, sweetening Bulger’s pension by $17,000, to $196,000 a year.
State Treasurer Timothy Cahill, who oversees the state pension fund, warned that a ruling for Bulger could touch off a “gold rush.” Indeed, after the decision last November, former state employees and politicians lined up for pension adjustments.
Marie Parente, who was “retired” by voters last fall as a Milford state representative, argued her Statehouse parking space, and office and travel expenses, should count toward her pension, adding $4,000 to $5,000 a year to the $50,000 she now collects. She said she felt like a “piker” for having worked so long for so little “when that Japanese pitcher gets $50 million.” She was referring to Daisuke Matsuzaka of the Red Sox. Parente was turned down but has filed an appeal.

San Antonio supporters lose hope
Parente voted last July to override the veto of Ruane’s pension but never got to vote on the San Antonio bill.
Methuen state Rep. Arthur Broadhurst said he and the city’s state senator, Steve Baddour, didn’t have the clout.
“Some legislators have more ability to get things through than others,” said Broadhurst.
Boston state Rep. Angelo Scaccia, a member of House leadership, pried the Ruane bill out of the same committee where the San Antonio bill died. Baddour said he would refile the legislation this year if the Methuen City Council asks.
The bill would grant a $16,000 annual city pension to the officer’s widow, Susan, and children David, 12, and Kailey, 9.
Henrick remains bitter the Legislature provided for Ruane’s widow and not David San Antonio’s, and he has lost hope it ever will.
“You’re damn right I’m upset about it,” Henrick said. “I’m trying to help a widow with small children. The bill’s dead. I’m not going to push again.”

Staff writers Shawn Regan and Stacie Galang contributed to this report by Edward Mason. They write for The Eagle-Tribune of North Andover, Mass. E-mail them at emason@eagletribune.com

State employees retiring in 2006
Median Median Median % over
Number age service pension $50,000
Group 1 972 60.9 20.4 $19,623 14.3%
Group 2 235 60.1 22.3 $22,607 9.8%
Group 3 27 55.4 27.3 $62,943 81.5%
Group 4 201 53.4 23.5 $32,305 14.9%
TOTALS 1,435 59.5 21.5 $24,332 14.9%

Source: Public Employee Retirement Administration

Calculating a pension
Massachusetts public employee pensions are calculated based on four variables:

1. Group classification
Employees are divided into Groups 1 through 4. Group 1 members are officials and general employees with nonhazardous jobs. Group 2 includes employees with hazardous jobs, such as ambulance attendants, licensed electricians and mental health hospital attendants. Group 3 is for state police. Group 4 covers public safety officials and employees, including police officers and firefighters.

2. Benefit rate
Benefit rate is determined by age at retirement and Group classification. Generally speaking, the older the employee and the higher the group number, the greater the benefit rate. For example, a 55-year-old Group 1 employee has a benefit rate of 1.5 percent. An employee of the same age in Group 2 has a benefit rate of 2.0 percent and in Group 4, 2.5 percent. (State police pensions are calculated slightly differently.)

3. Average annual rate of regular compensation
This figure is the average of the employee's three highest consecutive years of regular compensation. (Bonuses, overtime, police detail pay, unused sick time and severance pay do not count.)

4. Creditable service record
The total of full years and months of service.
Example
A 68-year-old Group 1 employee has a benefit rate of 2.5 percent (.025). Average annual rate of compensation is $36,000 and creditable service is 32 years. To calculate the pension, multiply benefit rate times average annual rate of compensation times creditable years.
Benefit rate: .025
Avg. pay (year): x $36,000
Creditable years: x 32
= $28,800 a year, or $2,400 a month
Note: Veterans get an additional $15 per creditable year of service up to a maximum of $300 a year.

Source: Massachusetts Public Employee Retirement Guide
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