In your retirement system article, you missed the most important Retirement Board vote. When the City began its pension obligation fund catch-up, the annual payments increased each year by 9.6% with a fully funded date, 2031. This aggressive approach crowded out essential city and school services. Current residents were unfairly paying for the failures of past administrations. I remember seeing that annual pension payments would increase to $70 million annually, which would have been nearly 15% of revenue.
When I became Council President, I formed a committee of Chris Brezski, Becky Grossman, Rick Lipof, and myself to study a better approach. We argued to the Mayor and the Retirement Board that we reduce the annual payment increase to 3.5% (the growth rate of City revenue) and move the fully funded date to 2035 – still well within the state mandated 2040. Our request was refused, but the Retirement Board allowed a reduction of the annual increase to 6.9%, better but still unnecessarily aggressive.
This year – missed by the Fig – the Retirement Board not only moved the fully funded date to 2035 but reduced the annual increase to 3.6%. This change – missed in your article – will free up funds to pay for needed city and school services. This may mitigate the need to use pension obligation bonds. Of course, if the bond rate is favorable as compared to the rate of return on investments, we still might want to use POBs but this strategy may no longer be necessary.
If the Retirement Board and the Mayor had worked to accomplish this reduction of increase to 3.6% (equal to the growth of revenue), three years ago, the budget fights of the last three Councils could have been unnecessary. I won’t look back – I’m just happy that it has happened now.
Susan Albright
Councilor-at-Large, Ward 2
Newton City Council