If you are a municipal employee who hopes one day to retire with an adequate pension — or simply a taxpayer who hates to see your money thrown down the tubes — pay attention to a new report from the Pioneer Institute, which examines the problem of inadequately funded municipal pension systems and offers a sensible solution.
Study author Iliya Atanasov concludes that non-state public pension systems — there are 102 of them in Massachusetts, including local, regional and agency pension funds — passed up $2.9 billion in earnings (from 1986 to 2015) they could have realized had their assets been managed by the state retirement board.
The study recommends that all of those separate funds — many of which remain significantly underfunded — transfer their assets to the state Pension Reserves Investment Management board, which manages retirement funds for state employees and teachers. Doing so should improve returns, lower costs and save local taxpayers money. And who could object to that?
“Many of these local boards have fallen on hard times through a combination of poor management practices, insufficient contributions and unsustainable benefits,” Atanasov writes.
In 2007 Beacon Hill passed a law requiring pension systems that are less than 65 percent funded to transfer their assets to PRIM. But the Pioneer report suggests that doesn’t go far enough, offering too many loopholes and allowing systems that still manage their funds independently “to deliver mediocre results and become a drain on local budgets.”
Because, after all, the bigger the gap between assets and required payouts — the bigger contribution taxpayers have to make.
Pioneer’s proposal is to give the local funds five years to transfer their assets to PRIM. At a minimum, the report suggests requiring systems that are less than 90 percent funded to make the move — and giving cities and towns that participate in regional systems the power to order the transfer of their assets to the state fund.
Such a move would mean better returns for pension plan participants and substantial savings for taxpayers. The Legislature should seriously consider it.