Resolution Ensuring Sustainable OPEB Costs for Cities and Towns and Local Taxpayers (2014)

As adopted by the members on January 25, 2014.
 
Whereas, cities and towns deeply value the dedication and service of their public employees, both active and retired, and are committed to providing important benefits for employees and retirees, including quality health insurance; and
 
Whereas, cities and towns have an obligation to their residents, taxpayers, employees and retirees to ensure that the cost of employee benefits is affordable and sustainable, otherwise the financial impact would force deep cuts in essential services to citizens and businesses, and reductions in the municipal workforce; and
 
Whereas, Other Post-Employment Benefits (OPEB) are the set of benefits offered to retirees and their dependents other than pensions, mainly consisting of medical insurance, dental insurance, and Medicare Part B premiums; and
 
Whereas, in most communities an employee can work for 10 years for 20 hours a week and be 55 years of age and receive these benefits for life, and there is no relationship between the benefit and the years of service and age of recipient at retirement; and
 
Whereas, the financial liability to be paid by local taxpayers is the present value of the government entity’s share of retiree benefits for those who are retired, as well as for those who are vested and therefore have a right to retire in the future; and
 
Whereas, taxpayers in the cities and towns of the Commonwealth are facing a combined OPEB liability of $30 billion, double that of the much more visible and understood pension liability; and
 
Whereas, municipalities have little control over the underlying cost drivers of health care, which are determined by the health care providers and institutions, and which have been increasing at double the rate of wages; and
 
Whereas, despite municipal health insurance reform and the recently enacted Massachusetts payment reform law, health care costs are rising at a rate faster than revenue; and
 
Whereas, these costs are unsustainable in the long term for cities, towns and taxpayers; and
 
Whereas, under Proposition 2½ municipalities will be forced to drastically cut jobs and eliminate vital services if OPEB costs cannot be controlled; and
 
Whereas, efforts to reform the rules governing health care benefits for retired local government employees should include a commitment to intergenerational equity that maintains health care access for already-retired employees but ends the practice of shifting costs to future generations; and
 
Whereas, any new rules governing health care benefits for retired local government employees should be financially sustainable and not lead to reduced funding for police and fire protection, education, public works and other core local government services; and
 
Whereas, OPEB legislation should provide real moderation of growth in the unfunded liability within the first decade and not delay needed reforms and cost controls; and
 
Whereas, OPEB legislation should not impose any new unfunded mandates, preempt local authority, or take away tools that cities and towns now use to control health insurance costs;
 
Therefore, in order to ensure sustainable municipal and school services and sufficient funding for OPEB costs while at the same time providing fair access to quality health care for retired career local government employees, it is hereby resolved by the members of the Massachusetts Municipal Association as follows:
 
That the House and Senate should approve and the Governor sign balanced and effective OPEB reform legislation that includes the following key provisions:
 
• Increase the minimum age at which former employees become eligible for retiree health care benefits by 5 years;
 
• Increase the minimum years of service from 10 to 20 for former employees to qualify for retiree health care benefits;
 
• Prorate health care benefits based on years of service after 20 years with a maximum benefit after 30 years;
 
• Exempt already-retired employees from new eligibility and proration requirements;
 
• Reduce the impact of the new rules for career employees nearing retirement balanced by the need to control growth in the unfunded OPEB liability within the next 10 years;
 
• In order to manage local budgets and preserve vital municipal and school services, and prevent an unacceptable burden on local taxpayers, all cities and towns must retain their authority to make contribution rate changes for all current and future retirees, and should equally share the local option flexibility to implement a variety of implementation schedules, differential contribution ratios and other sound management initiatives;
 
• Oppose the imposition of any unfunded mandates on cities and towns related to providing or increasing benefits to individuals who do not currently receive them, or forcing higher municipal contribution rates; and
 
That cities and towns continue to advance best practices, including prorating part-time service based on the number of hours worked for the purpose of determining eligibility for retiree health benefits; and
 
It is further resolved that a copy of this resolution shall be provided to the Governor and members of the General Court of the Commonwealth.