On April 14, the City’s Retirement Board voted unanimously to approve Mayor Marc Laredo’s request to extend the schedule for funding the City’s outstanding pension liability. The City had originally planned to have its pension liability paid off by 2032. The new plan will pay off the liability by 2035, and this will make an extra $5 million available for City operations in the next fiscal year.
The City is mandated by the state to fully fund all of its government pension plans by 2040. Newton’s unfunded pension liability has come under close scrutiny in recent years, especially in light of challenging Newton Public Schools (NPS) budget discussions.
The Ruthanne Fuller Administration was a consistent champion of the 2032 funding schedule. In an October 2025 email to the Newton community, Former Mayor Fuller framed the 2032 plan as a “critical need” and “important decision.”
However, critics of the 2032 funding schedule, including former School Committee Chair Chris Brezski, have argued that meeting the unfunded liability eight years ahead of the state-imposed deadline will result in unnecessary struggles to fund City services. In an April 2025 City Council meeting, in the midst of last year’s NPS budget discussions, Brezski recommended that the City consider “easing off the gas” in the rate of growth of pension funding.
In an April 13 meeting of the City Council’s Finance Committee, the City’s Chief Financial Officer, Maureen Lemieux, made clear that the Laredo Administration is committed to exploring alternative methods to fund the pension liability.
She said that the Administration did consider leaving the pension funding plan as-is, but ultimately determined that intervention was necessary.
“We very quickly came to the conclusion that that was not a viable option for the City, that we knew that we, as a group, needed to do something,” she said.
The Administration, Lemieux said, is pursuing two different paths of intervention in parallel. The first is the extended funding schedule. The second is the selling of a pension obligation bond (POB).
Extending the funding schedule
In the April 13 Finance Committee meeting, Lemieux said that the Administration had asked the City’s actuary to determine what the City’s finances would look like if the pension funding schedule were extended from 2032 to 2033, 2034, or 2035.
Newton’s government pension plans include a cost of living adjustment (COLA). During the actuary’s evaluation process, the Administration also asked about the possibility of increasing its COLA base funding.
Newton has vested its pension funding regulation authority in a Retirement Board, which has full power to set the funding schedule, independent of the Mayor and the City Council.
With the actuary’s analysis in mind, Lemieux said that several weeks ago, she and Mayor Laredo asked the Board to push the pension funding schedule back to 2035. In return, she said, the Administration offered to increase the COLA base from its current $15,000 to $18,000.
Lemieux also said that while the extended schedule would make an extra $5 million available for City operations in the next fiscal year, that $5 million is already included in the Administration’s draft budget proposal. She said that it was part of what the Administration considered when making its “historic” NPS allocation, which will increase the school budget by 5.75%.
At the April 14 Retirement Board meeting, Lemieux presented two main pathways to achieve full pension funding by 2035. One would assume a 6.9% return on investments, and the other would assume a more conservative 6.75% return on investments.
The Board unanimously voted to approve Funding Schedule #2a — a version of the more conservative pathway, which increases the City’s annual pension payment by 1.6% annually, plus 2% annually to “generate a small buffer.” The Board’s approval was expressly contingent on the City Council approving the proposed $3,000 COLA increase over three years. (The Finance Committee will vote on that COLA increase on May 11, and the full City Council will likely vote on it on May 18.)
Selling a pension obligation bond
Pension obligation bonds (POBs) are taxable bonds that fund unfunded portions of pension liabilities by taking on debt. In the April 13 Finance Committee meeting, Lemieux outlined what the process to sell such a bond would look like.
First, Lemieux said, the City’s actuary would determine the value of the pension liability, which would be reflected in the POB. The bond itself would cost about $2 million to issue.
The Finance Committee voted 8-0 to approve the Mayor’s request to petition the state’s General Court for the authority to issue POBs. The City Council will likely vote on this measure on April 27.
If the City Council allows the process to proceed, Newton’s State Delegation would have to “shepherd” the POB request through the state legislature. After State House approval, the City Council would have to vote to approve a bond authorization. Finally, the POB would go before the Secretary of the Massachusetts Executive Office for Administration and Finance (A&F) for approval. Lemieux told Fig City News that this process could take up to a year.
In determining whether or not issuing a POB was appropriate, Lemieux said that she spoke with Nick Lehman, an analyst at Moody’s Corporation, the firm that assigns credit ratings to the City.
In a February 26 email to Lemieux, Lehman said that ultimately, issuing a POB would not have a significant impact on the City’s leverage ratio (a measure of the City’s debt compared to cash or equity).
“It’s just a shift from a pension liability to a debt liability,” Lehman wrote.
Long-term effects
Lemieux said that the challenges inherent in paying off the liability will remain – particularly thanks to Proposition 2½, a state law that prevents municipalities from raising the property tax base by more than 2.5% annually (plus new growth).
However, Lemieux also said that these changes to the pension funding plan will offer significant financial relief.
“Even though these numbers, once we get it all put together, will be incredibly favorable to us, it is still not going to be the panacea to fix all things,” she said. “We need to make sure that our expenses are not growing by more than our revenues. We’re still going to have to be diligent. But this affords us the opportunity to make significant transformative changes in our operation budget as we move forward.”
Theo Younkin is a Fig City News student reporter, a senior at Newton South High School, and former Co-Editor-in-Chief of the NSHS Lion’s Roar.
