, Newburyport, MA

Local News

July 25, 2013

Pension accounts woefully underfunded

NEWBURYPORT — A recently released report gave Greater Newburyport communities failing grades for meeting barely half of their funding obligations for employee pension plans.

The Boston-based Pioneer Institute gave F’s to Amesbury, Newburyport and the Essex Regional Retirement System, which includes Salisbury and Newbury, for their “funded ratio,” which measures the percentage of current and future pension costs that retirement boards have covered.

According to the report released last week, Amesbury has less than half of its costs covered, while Essex Regional has about 51 percent covered. Newburyport leads the region with a 58 percent funded ratio, yet not good enough to warrant a passing grade from the Pioneer Institute.

Many of the institute’s facts can be found inside the Public Employee Retirement Administration Commission’s annual report, used as a resource for community finance directors.

According to the PERAC annual report, Newburyport has $36.1 million of unfunded liability and Amesbury has $39.1 million. Essex Regional, which runs the pension systems for 19 communities, has $257.8 million of unfunded liability. “Unfunded liability” is an accounting term for the amount of money needed to fully fund pensions that employees are expected to collect in their retirement years.

As recently as 2001, Amesbury’s ratio was around 72 percent but it saw a precipitous drop of 10 percent the following year. Amesbury Mayor Thatcher Kezer said twice in the last 10 years, the city offered employees early retirement deals that negatively impacted the funded ratio.

The issue of unfunded employee retirement pensions hit the national stage last week when the city of Detroit announced it would seek Chapter 9 bankruptcy to shed itself of an estimated $20 billion in debt. About a billion of that debt is attributed to promised retirement pensions. Should a federal judge grant the once-great Motor City bankruptcy protection, it could shred the pensions of thousands of retirees.

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