• The state has done a dismal job at managing its retirement funds. The unfunded pension liability is a staggering $22B.
• The state appropriation for the unfunded liability is $1.3B.
• Neither the Governor nor the Treasurer has issued a plan to resolve the liability or to safeguard the problem from getting bigger.
• The state pension system provides overly generous benefits to high paid employees.
• Widespread abuses of the system. In 2005, 40% of the employees retired outside of group one, yet 80% of the state employees fell into group one that year.
• The system weighs heavily on the last three years of service.
• The system creates incentives to add benefits for political gain while passing costs to the next generation.
• The current fiscal crisis makes status quo untenable.

• These changes will save the state a minimum of $50M per year or $500M over 10 years.
• If cities and towns adopted these changes to include teachers, the savings would double to $100M per year or $1B over 10 years.

The proposed changes would apply to the approximately 40,000 state and quasi-public employees that have been employed by the state for less than 10 years and have not yet vested.

1. Eliminate Outrageous Pension Payments; Cap Pensions at $90,000
   

   There are more than 400 employees earning a pension of $90,000 or more from the state. This proposal will cap the annual pension payments at $90,000. These restrictions will keep the state’s commitment to provide a guaranteed source of retirement while setting appropriate restrictions to protect the state. Employees would still have the ability to utilize the state’s current deferred compensation plan to provide additional retirement income.

   
   
2. Stop Costly “Group Jumping” Abuse
   

   It is the current practice to wait until retirement before assigning employees to a group as opposed to making the assignments when they are hired. This practice results in a lack of transparency because the public can not track those employees who group jump during their career. This proposal will:

   • Assign employees to groups when hired rather than at retirement
   • Require employees to work a mandatory minimum of 10 years in groups 2, 3 and 4 before eligible for retirement in that group.
   • Require the State Retirement Board to maintain and make public annual reports that list employee movement between groups.
   • Simplify the group assignments.

   
   Current Group Assignments
   Group 1 - general state employees
   Group 2 - contains an assortment of arbitrary positions (enhanced retirement benefits)
   Group 3 - state police
   Group 4 - contains an assortment of arbitrary positions (enhanced retirement benefits)

   
   
3. “Hack High 3” History…Fair Calculations Based on Average Career Compensation
   

   The current system calculates pensions based on the maximum salary over three years with no regard of the salary for the remaining years. For example, currently, a long-time employee making $40,000 can seek a promotion increasing his salary to $80,000 at the end of his career. Under this scenario, the pension would be calculated based on the $80,000 even though he earned $40,000 for the majority of his career.

   
   

   Under this proposal, pensions would be based on the average salary over the course of the employee’s career, adjusted for inflation, as opposed to the high three years.

   
   

   According to a Pioneer Report, a 60 year old employee receiving a $10,000 raise for the last three years of service will receive $176,000 in pension payments over the course of his life. The pension is obviously not paid for because he did not contribute the appropriate amount of funds over the course of his career. To put this into perspective, this employee would have had to purchase a $120,000 annuity to provide the same retirement income allowed by the end of career raise.

   
   
4. Raise the Bar for Benefit Sweetening…2/3’s Vote and Equivalent Spending Cut Required
   

   The Legislature is known to pass laws to benefit individuals with little regard to how the change will impact the pension system. This proposal requires a 2/3’s vote of the legislature before allowing special treatment of individuals. Additionally, all changes must include funding for the change at the time of passage. We need to stop the practice of passing the costs onto future generations.

   
   
5. Modernize Retirement Age
   

   Currently, public employees are allowed to retire at age 55, which is seven years earlier than social security retirement. This proposal would increase the minimum retirement age to 60 (which is still two years earlier than social security eligibility).

   
   
6. Call For An Immediate Forensic Audit of the Group Assignments
   

   A forensic audit will help establish transparency of the group assignments by the State Retirement Board. For example, in 2005, almost 40 percent of state employees retired outside of group 1. This is high considering that almost 80 percent of the state positions fell into the group 1 category in 2005. This brings into question if employees are retiring outside of the group they should have retired in.