Resolution on the Urgent Need to Ensure Sustainability for Other Post-Employment Benefit Costs (2013)

As adopted by the members on January 26, 2013.

Whereas, Other Post-Employment Benefits (OPEBs) 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 the 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, OPEB differs from pensions in that municipalities have control over wages, which are the primary input into pension costs, but 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 payment reform, health care costs are rising at a rate faster than revenues; and

Whereas, these costs are unsustainable in the long term for cities and towns, particularly as more employees retire and a rising number of communities have a greater number of retirees than active employees; and

Whereas, under Proposition 2 1/2, municipalities will be forced to drastically cut jobs and eliminate vital municipal services if OPEB costs cannot be controlled;

Therefore, in order protect municipal jobs and vital local programs and services, it is hereby resolved by the members of the Massachusetts Municipal Association as follows:

• The MMA will take a prominent role as part of the Special Commission to Investigate and Study Other Post-Employment Benefits and subsequent committees, commissions, and working groups to advocate for reforms to make OPEBs affordable and sustainable for decades to come for both employees and municipalities; and

• The Commonwealth must recognize the unaffordable OPEB liability that cities, towns and taxpayers are facing, and provide a path to reform and sustainability that ensures benefits for retirees that are affordable for taxpayers, and allows for flexibility and locally set practices to ensure solutions that fit each community; and

• Municipalities must have options for managing OPEB costs that recognize the importance of tools to invest funds when the municipality deems it manageable and appropriate, but the Commonwealth must reject any policy that would impose a prefunding requirement, as such an unfunded mandate would increase property taxes and force cuts in vital municipal and school programs; and

Be it further resolved that a copy of this resolution shall be presented to the Governor, the members of the Massachusetts Legislature, the members of the Massachusetts Congressional Delegation, and the President of the United States on behalf of the cities and towns of the Commonwealth.