Governor Deval Patrick's Budget Recommendation - House 1 Fiscal Year 2010

Governor's Budget Recommendation FY 2010

Outside Section 9



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Funding Unfunded Liability for Retiree Health and Other Benefits

SECTION 9.   (A) Section 5C of chapter 29 of the General Laws is hereby amended by striking out clause (c), as appearing in the 2006 Official Edition, and inserting in place thereof the following clause:-
          (b) of the remaining amount of the consolidated net surplus after amounts made available in clause (a), half shall be transferred to the State Retiree Benefits Trust Fund, and half shall be transferred to the Commonwealth Stabilization Fund; and.

(B) Section 24 of chapter 32A of the General Laws, inserted by section 8 of chapter 61 of the acts of 2007, is hereby amended by inserting after subsection (b) the following subsection:-
          (b 1/2) Notwithstanding chapter 29D or any other general or special law to the contrary, 90 per cent of the monies received in any fiscal year as a result of any claim or action undertaken by the attorney general against a manufacturer of cigarettes to recover the amount of medical assistance provided pursuant to chapter 118E or any other claim or action undertaken by the attorney general against a manufacturer of cigarettes including, but not limited to, the action known as Commonwealth of Massachusetts v. Philip Morris, Inc., et al., Middlesex Superior Court, No. 95-7378, shall be deposited in the fund. The remaining 10 per cent of these monies shall be deposited in the General Fund, to be used subject to appropriation for tobacco control and other health care programs.

(C) Said section 24 of said chapter 32A, as so inserted, is hereby further amended by striking out subsection (d) and inserting in place thereof the following subsection:-
          (d) Upon authorization by the board, any other political subdivision, authority, board or instrumentality of the commonwealth may participate in the fund using the same procedures required for participation in the PRIT Fund pursuant to section 22 of chapter 32. The trustees of the fund shall adopt regulations for participation in the fund after consulting the public employee retirement administration commission.

(D) Said chapter 32A is hereby further amended by adding the following section:-
          Section 25. (a) In each fiscal year the comptroller, without further appropriation, shall transfer, in addition to the amounts required by subsection (b 1/2) of section 24, an additional amount from the General Fund to the State Retiree Benefits Trust Fund necessary to fully fund the system as determined by the schedule set forth in this section. The comptroller may make such transfer in increments during the fiscal year as he considers appropriate to meet the cash flow needs of the commonwealth. The secretary of administration and finance shall file the first such funding schedule not later than March 1, 2010 and shall file subsequent schedules triennially on or before January 15. The secretary shall establish the funding schedule and update it from time to time after reviewing the periodic actuarial valuation reports required by subsection (g) of section 24, and shall notify the house and senate committees on ways and means regarding the actuarial, economic, and demographic assumptions upon which the actuarial valuation reports and such other reports are based, and the manner and methodology used in the development of the actuarial reports and recommendations. The secretary shall establish the schedule such that the increase in the amortization component of the appropriations or transfers required by this section from year to year shall not exceed the increase in the commonwealth's payroll expense and benefits for the prior fiscal year or 4.5 percent, whichever is greater. The transfers form the General Fund required by this subsection shall not be made until the unfunded pension liability is reduced to zero in accordance with the second paragraph of section 22C of chapter 32.
          (b) The secretary shall design this funding schedule, and any updates, to reduce the unfunded actuarial liability attributable to the commonwealth's post-employment benefits to zero as of June 30, 2038, to meet the normal cost of all future benefits for which the commonwealth is obligated, and to meet any other component of the commonwealth's post employment benefits liability, as defined in subsection (g) of section 24. Updates of the funding schedule required by changes in the projected unfunded actuarial liability as determined by any periodic actuarial valuation report pursuant to this section, may reflect the further amortization time periods authorized by said subsection (g).

(E) Notwithstanding subsection (b 1/2) of section 24 of chapter 32A of the General Laws, inserted by subsection (B), for fiscal years 2010 to 2013, inclusive, of the 90 per cent of the monies received in that fiscal year as a result of any claim or action undertaken by the attorney general against a manufacturer of cigarettes to recover the amount of medical assistance provided pursuant to chapter 118E or any other claim or action undertaken by the attorney general against a manufacturer of cigarettes including, but not limited to, the action known as Commonwealth of Massachusetts v. Philip Morris, Inc., et al., Middlesex Superior Court, No. 95-7378, the following portions shall not be deposited in the State Retiree Benefits Trust Fund but rather shall be deposited in the General Fund:
          (a) for fiscal year 2010, all of the 90 per cent of those monies;
          (b) for fiscal year 2011, 3/4 of the 90 per cent of those monies;
          (c) for fiscal year 2012, half of the 90 per cent of those monies;
          (d) for fiscal year 2013, 1/4 of the 90 per cent of those monies.
          In each such fiscal year, the remainder of the 90 per cent of those monies shall be deposited in the State Retiree Benefits Trust Fund.

(F) Notwithstanding any general or special law to the contrary, during fiscal year 2010, the comptroller shall, according to a schedule developed in consultation with the state treasurer and the secretary of administration and finance, transfer $394,320,000 from the General Fund to the State Retiree Benefits Trust Fund.

(G) There shall be a special commission to study further changes to health care benefits provided to employees and retirees of the commonwealth, its political subdivisions, authorities, boards and instrumentalities.The commission shall consist of the trustees of the State Retiree Benefit Trust Fund, the chairs of the joint committee on public service, the chairs of the house and senate committees on ways and means, the house and senate minority leaders, the personnel administrator, the director of the office of employee relations, the executive director of the Massachusetts Municipal Association and the president of the Massachusetts AFL-CIO or their designees. The commission shall take into account fiscal sustainability, benefit changes, eligibility, structure of benefits, contribution changes and other items that address employee and retiree needs and fiscal impact. The comprehensive evaluation of total compensation for state employees shall also at least review salaries, health care benefits, sick time, vacation, holidays, life insurance, dental and vision benefits, short and long-term disability, workers compensation. The commission shall explore further funding options, including but not limited to consolidation of non-commonwealth systems of retiree health care funding under the State Retiree Benefits Trust Fund, establishment of health savings and health retirement accounts, and establishment of a voluntary employee benefits association. The commission shall study existing pension benefits as they relate to federal Social Security Administration benefits and the structure and stability of that system. The commission shall analyze contribution levels, vesting periods, eligibility criteria related to the age of the retirees. The commission shall study salary levels for public employees, particularly a comparison between public service and private sector hourly wages and benefits for similar job responsibilities. The commission shall engage professional advisors as needed to accomplish its purposes. The commission shall file its report with the clerks of the senate and house of representatives, including any recommendations for legislation, not later than December 1, 2009.
 
 

Summary:
This section: * requires a funding schedule for the Commonwealth's unfunded liability for state retiree health and other benefits (OPEB); * phases in the use of tobacco settlement proceeds and half of the consolidated net surplus, beginning as soon as fiscal year 2011, to pay for this funding; * allows municipalities, authorities and other state instrumentalities to join the state program; * transfers $394,320,000 from the General Fund to the State Retiree Benefits Trust Fund, in order to support retiree health care benefits in this fiscal year; * establishes a special commission to recommend further changes in retiree health benefits.



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