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Date: 10/26/2022
SPRINGFIELD – The base pay for retirees has remained the same since fiscal year 2013. Due to rising concerns with inflation, the City Council approved an order to increase retirees’ base pay amount by $1,000 during their Oct. 17 meeting.
Background
The increase – from $13,000 to $14,000 – and a 3 percent cost-of-living adjustment received previous approval from the city’s retirement board. On Oct. 14, Mayor Domenic Sarno expressed his support for their decision in a press release, ultimately sponsoring the order before the council’s meeting.
“I indicated to the board that we pride ourselves on our prudent fiscal management, but with these unprecedented times of a 40-year-high in inflation and a looming recession, it is imperative that we assist our long-term retirees and seniors, ‘to make ends meet.’”
Sarno continued, “I commend the board’s actions and do not want our retirees and seniors to have to make the difficult decisions whether to get their medicine and/or put food on the table. Again, and simply put, it’s the right thing to do.”
The payment of retirees ties in with the city’s continual process of addressing the unfunded pension liability. The roughly $898 million remaining in unfunded pensions is a focal point of Sarno and the council after being unaddressed during previous administrations. The city spent $56.1 million toward the unpaid pensions this year – an increase from the $51.5 million paid in 2021. The city expects to pay $61.1 million next year toward the pension.
Currently, the pension obligation is around 35 percent funded.
The funding schedule will increase by 9 percent annually, with payments rising as high as $120 million by 2030. The city envisions paying off the liability by 2033 based on their current payment plan. Springfield is required to pay off all unpaid pension liabilities by 2040 as a part of a state mandate.
City Council meeting
Chief Administrative and Financial Officer TJ Plante presented the item to the council. Plante explained that the increased base pay came out of a desire to aid retirees during a time of ongoing financial struggles.
“During the recession we are having now, that this a time to give our retirees additional [compensation] … every little bit helps,” said Plante.
Ward 7 City Councilor Timothy Allen, who continues serving as a council representative during pension processes, explained what impact the increase would have.
“It’s not a $1,000 increase, it’s a $1,000 increase in the base on which the calculation is done. The impact at 3 percent is $30 dollars a year for a pension person in the pension system,” said Allen.
Allen said the pension system “has been challenged” in the past as the council and city leadership focus on the unfunded pension liability. However, he stressed that the city continues to be “incredibly responsible” regarding the liability and doesn’t believe it should impact the retirees’ base pay increase.
“I am supporting this because I don’t think the pension people should be held back from getting a small increase in the base for their pension because of the situation the pension has been in for 10 years – or longer,” said Allen.
Allen said the $898 million in unfunded pension liabilities increases to $904.7 million for when the base pay increase is implemented. Next year’s annual payment would increase by $6,000. City Comptroller Patrick Burns clarified that the money factored for the base pay increase will rise by 9.2 percent annually to coincide with the city’s pension liability funding schedule.
When asked if he was concerned about the increase, Plante said it was a necessary move.
“We are trying to walk a fine line. I think it’s ok for us to give retirees a cost-of-living adjustment and raise the base. I understand that it adds $6.7 million to our liability. This is a problem we’ve had going on for years, and I just don’t know if I want to take it out on retirees and not give them a cost-of-living adjustment and move the base,” said Plante.
Springfield Retirement Board Chaiperson Robert Moynihan also expressed his support for the increase.
“The Retirement Board as a whole has been very fiduciary in looking at this. It has not been done in nine years now, and as a result, I think the retirees deserve a small increase,” said Moynihan.
The City Council ultimately approved the order in a 12-1 vote, with Ward 2 City Councilor Michael Fenton representing the lone no vote.