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PRESS RELEASE- After Downing's Supportive Remarks, Senate Votes For Final Approval of Bills Providing Municipal Options and Fiscal Relief
July 20, 2007

Boston- State Senator Benjamin B. Downing (D-Pittsfield) announces that yesterday, July 19th, the Massachusetts Senate approved two important pieces of legislation aimed at providing options for municipalities to boost their pensions systems and to access the state health insurance plan through the Group Insurance Commission (GIC).  Both bills were included in Governor Patrick’s Municipal Partnership Act, and received extensive consideration and redraft by the Joint Committee on Public Service, which Downing serves as Senate Chair.


Due to An Act to Reduce the Stress on Local Property Taxes Through Enhanced Pension Fund Investment, underperforming local pension systems in Massachusetts will now be rolled into the state’s pension fund to produce a greater return on investments.  If local pension investments yield an average 10-year rate of return at least two percent less than the state’s 10.51 percent rate and if local assets are less than 65 percent of their funded liability, then those assets will be automatically transferred to the state pension system. 


"This legislation will reform our pension investment system – making it work better for our retirees, our taxpayers and our cities and towns," said Downing. "Maximizing investment returns for retirement boards means greater flexibility for local budgeting and more secure funding for other needs. This legislation is the product of an arduous committee process, and the result is a great step forward."


The legislation targets 25 municipal pension funds that left a total of $123.8 million in potential revenue on the table in 2006. Pittsfield is one of the 25 municipalities captured by the legislation.  Currently, the City of Pittsfield’s pension system is 51.5% funded, with an 8.09% rate of return over ten years.  Pittsfield has left $15,366,750 on the table over the past decade – millions of dollars that had to be made up by property taxes, other sources of revenue or through the reduction or elimination of services. 


Senate President Therese Murray said the legislation will ease the burden on taxpayers in cities and towns with lackluster pension funds.  “This is a way to boost the return on local pension funds that are not making as much as they could if they were under the state system,” Senate President Therese Murray said. “It’s a great opportunity for cities and towns to generate millions of dollars they otherwise would not see and relieve taxpayers of the burden of underperforming investment funds.”


The legislation requires PERAC to notify the town that its fund is underperforming and transfer its assets to the Pension Reserves Investment Management (PRIM) Board, which oversees the PRIT fund. Systems that would be captured by this bill have the opportunity to join  PRIT if they do so by October 1, 2007.  Those systems who voluntarily opt retain their ability to take control of their assets again, starting in 2012. A local pension system can appeal the determination that it is underperforming to a four-member review board.


All municipalities will retain their administrative functions, including their authority to distribute pension benefits as they see fit.


The Massachusetts Senate also gave their final approval to An Act to Reduce the Reliance on Property Taxes Through Municipal Health Care, creating a local option for cities and towns to buy their health insurance through the state insurance plan, the Group Insurance Commission (GIC). The GIC offers comprehensive plan options while offering municipalities and their employees savings.  The legislation will help municipalities reduce health insurance costs, a potential savings of $120 million to $180 million per year statewide.


“Giving municipalities options to curb escalating health care costs is an opportunity we as a legislative body cannot afford to miss,” stated Downing.  “This legislation opens up the option for cities and towns to offer their employees high quality health plans with lower premiums.  I am thrilled that this measure quickly earned the unanimous support of the Senate and I look forward to seeing our cities and towns take advantage of these cost savings.”


GIC rates are expected to rise by just 5 percent in 2008 compared to 11.3 percent for all other Massachusetts employers.   Decisions to join the GIC will require 70 percent approval from a municipality’s union employees and retirees.


“This legislation provides a valuable tool for municipalities to preserve health care benefits and better control their health care costs," said Sen. Richard T. Moore (D-Uxbridge), sponsor of the bill and Chairman of the Joint Committee on Health Care Financing. "It will help to preserve the affordability of quality health insurance for thousands of local employees, free-up valuable resources for municipal services like education and perhaps reduce some of the more contentious debates between local leaders and their unions.”


The legislation adds two immediate municipal members to the GIC oversight board, increasing the number from 11 to 13. Another two municipal members will be added after the first 45,000 employees sign up for the plan.


Both bills are now on the Governor’s desk awaiting his signature and final approval. 



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