[Ed note: My Southborough accepts signed letters to the editor submitted by Southborough residents. Letters may be emailed to mysouthborough@gmail.com.
The following letter is from Al Hamilton.]
To the Editor
If you want to really get depressed, spend some time talking to the town auditor and actuaries. In the last month the Select Board did both. We need to talk.
First the good news:
The auditors report did not find any financial irregularities in the town accounts. This was not an exhaustive review particularly of some of the smaller accounts but is consistent with past findings.
Now for the depressing parts:
When we typically talk about the towns debts we talk about the towns bond obligations to pay for such things as school renovations, the public safety building, open space and the road programs. However, there are 2 classes of debt that we almost never speak about but they dwarf the other categories. Both relate to our ongoing obligations to retirees.
Under Funded Pension Obligations:
We have about $33.4 million in unfunded pension obligations. We are not unique; this is a nationwide problem. Massachusetts as a whole appears to be in the middle of the pack but this is hardly good news. The Commonwealth is requiring that local governments close this funding gap by 2040. Over the last 37 years we have managed to close about 53% of our unfunded obligations. Funding the last 47% in 14 years is a daunting challenge. This will require significant increases in our contributions to the Worcester County Retirement system over the next 15 years. There is only one source of these contributions, your tax dollars.
Other Post Employment Benefits (OPEB):
In addition to pensions, our retirees are entitled to other benefits, primarily healthcare. Like pensions these benefits are underfunded. That gap is larger than our pension gap at $54.4 million. We have been paying this down at the rate of $250,000 per year. It does not take a degree in advanced mathematics to see that this sum is far from sufficient to close this gap. It should be noted that the $54.4 million gap rose this year by $11.4 million due to changes in insurance plans. A new plan which has been proposed could reverse this shift but regardless this sum is large and potentially larger than our unfunded pension obligations and at present it is unclear if we have a stable plan to address this matter. The ultimate source will again be you the taxpayer.
Is this really debt?
Yes, these 2 obligations have all the attributes of debt. They represent a stream of payments to 3rd parties (pensioners) into the future that are legally binding (no different than a bond or your mortgage). The value of that stream can be calculated by straight forward discounting calculations. The auditor confirmed that the bond rating companies view these categories as a form of town debt.
How did we get here:
The answer is somewhat complex for a detailed discussion you might want to read https://massinc.org/research/reckoning-with-historic-unfunded-municipal-pension-obligations/. The short answer is that for decades we did not fully set aside the monies to fund our obligation to our employees during the term of their employment. Indeed, for a while this was illegal. This practice violates a basic accounting principle of fully matching the costs of a service (in this case the employees labor) with the costs (salary, benefits, and retirement benefits) of that service. As a result, in the past we would be paying for an employee’s services long after, often decades, that service was delivered. The current programs to fully fund these plans are imposing an additional cost on current residents to pay for services delivered long ago in addition to fully funding the retirement obligations of current employees.
The second driver is that our retirees are living longer and health care costs continue to rise.
What can be done?
Unfortunately there is no magic cure. There are some things that would help like better management of our retirement systems but the grim reality is that to put our retirement obligations on a sound accounting and actuarial footing will require additional tax revenue and we the taxpayers are the only source. What we can do is pay attention and ask questions. On Saturday we will be asked to approve a large amount of borrowing. Town meeting members need to have a clear assessment of the impact of the town’s existing debt obligations both the formal borrowings and these less visible debts that dwarf our current bond obligations.
So much for this depressing subject, I think I will go out and stand in the spring sunshine and think about the summer.
Al Hamilton
35 Pine Hill Road
In a word: Unsustainable. In a phrase: Non-viable budgeting / “management.” Thank you to Mr. Hamilton for being the only person with a bit of courage to shed some light on this debt obligation and alerting the citizens paying the bills – that this too is added to the pile.
To fellow bill payer / taxpayers: “Pensions” (and health insurance benefits, etc.) are a 1960’s concept and enormous debt obligation (money from your pocket) that you are now being informed about just now with a small bit of transparency thanks to Mr. Hamilton, i.e. you are paying for someone else’s retirement. Do you know what your retirement account probably consists of? Your own savings.
Obviously, like most municipalities this type of offering is no longer affordable and viable in this era of deficits and cutbacks. If these benefits are still being offered, new policies must be drawn up immediately and 401k plans offered going forward.
As for audits and auditors, if you examine white papers on municipal operations, they (along with accountants) can often miss items and gaps, i.e. it happens all the time.
Importantly, please see the following link to with regard to St. Mark’s “Park.” Please explain how the entire road budget for the year was spent on this project?
[highlighted email]
This was March 2021. The project was introduced to the Select Board in November / December 2021. See links below. This was regarding private land, and the bill payer / taxpayers were handed the bills. The town’s subsequent “license” agreement appears to have been retrofitted later (in other words “legal permission” or legal agreement). There was no legal agreement apparently at the time(?) for the town to pay for and work on private land with St. Mark’s on a parking lot and park.
Who approved the contracts (these were prior to presentation as a “project” to Select Board)? And who authorized payment? Who decided to spend the entire town budget for roads on this project? And importantly, why didn’t the then Select Board immediately bring full transparency to the bill payer / taxpayers via press articles or at the November 2021 Town Meeting, but the above memos were sent in March 2021?
Excerpts from one taxpayer comment (My SB, 2023, please see link below)
A “yes” vote actually rewards St. Marks and the inventors of this screwball deal and runs roughshod over taxpayers who OBJECT and want real meaningful accountability. What’s to stop this from happening tomorrow?
I completely disagree with your opinion on the BOS. They knew what they knew when they knew it. See their Minutes. Follow the timeline and see the tape played at last Spring town meeting. Here’s the tape. https://vimeo.com/705491639
On this tape, Kathy Cook (current BOS chair), while on Advisory, speaks to the town road budget as DEPLETED. The taxpayers were not alerted by, before, or at town meeting in November 2021.
Please see the following link and important comments:
Letter: St. Mark’s Street & Park Timeline – My Southborough
To the taxpayers: PLEASE CONSIDER A “YES” VOTE on Mr. Barron’s ARTICLE 33 calling for a citizen audit committee – It’s your money.
I think the Costco cart needs to be backed up to the cashier and tell her the taxpayer / bill payers cannot afford everything. Where was the big picture “management” on debt and cash flow and more importantly the Financial Policies that would have addressed the above?
As for the debt obligation “unmentionables” that haven’t been addressed, atop of all the taxpayer bill pile of deferred road maintenance, capital items, DPW list, etc.), it is time for a Town Hall Forum PRIOR to Town Meeting for full disclosure with the bill payers / taxpayers on all of these looming and unaffordable tax increases. To restore the financial health of the town, priorities need to be discussed, cuts made, and set PRIOR to Town Meeting with the citizens who are paying these bills.
Thank you for your consideration.
Ms Shimkus
We need a dose of reality as we address this matter:
Finally, it is all well and good to rail against past mismanagement on these pages but what good does it really do. You had the chance to take out papers to run for the Select Board or find someone more to your liking to do so but did not. It is easy to throw stones, the hard work is trying to right the ship.
Thank you Mr. Hamilton for this additional information and opinion. Understood. It is much appreciated. Please see the following in response to your numbered points.
1) No one said it would be easy. Simply this: no matter what is looming for future increases or attempts at possible overrides, the budget eventually has to be balanced and sustainable. There must be a starting point somewhere. Boston and other municipalities are simply making the necessary cuts to stop deficits.
Please see the following links:
GRAFTON:
Grafton selectman says teacher contract talks could fix budget crisis
LEXINGTON:
Lexington, Massachusetts cutting teachers and staff, months after approving $660 million high school – CBS Boston
WHITMAN-HANSON (dual town system):
Whitman-Hanson considers more cuts after layoffs this fall
2) See #1 – there has to be a starting point somewhere. Grafton is talking to their teachers. Businesses facing the same crisis start gradually with an adjustment to benefits. Understood on the old versus new employees and the obligation to fund the underfunded. It’s just good to get it out in the open, with some transparency. Suggest a Town Hall forum before Town Meeting.
3) The simple reason the “history” of voters not cutting expenses is the format itself. It is difficult to object from the floor in three minutes or less. The town moderator has a history of running right over conscientious objectors. At a recent town meeting, many voters did not even have the warrant in hand and had not read it. Also, they are mostly a bit too polite.
Going forward: It would be better to have a pass-the-mic Town Hall forum before Town Meeting at the Senior Center to get a sense of the floor in a non-rushed format.
4) You ask: what good does it do to “rail” (your overly personal derogatory, talking down to this bill payer, not appreciated) against past management. That mischaracterization is unprofessional and not appreciated. This is a $65 – $70m business. Calling for accountability is important. You never answered the question: who approved those contracts and those invoices? Calling for accountability and transparency makes good business sense.
Here is your call for an audit (please see the following link), that sadly was voted down by your other sitting Select Board members. We agree. I object to being handed the St. Mark’s Park bill and would have rather seen better transparency by disclosing at town meeting what was going on. It’s a healthy and normal business discussion that leads to changes and best practices, not the negativity in your opinion.
Select Board member calls for audit of St. Mark’s Street & Park project (Updated) – My Southborough
It is perplexing when these exchanges of viewpoints devolve into the DIY response. That is also overly personal and unbusinesslike. Every citizen taxpayer has some time in their professional life to serve in some way – or not, as the timing may or may not be right due to other important commitments. A call for best practices based on business experience can be a way of contributing to the dialogue.
Thank you for your consideration.
Teacher pensions are not funded by municipalities and have no place in this conversation. Educator pensions in Massachusetts are almost entirely funded by the individual educators who are required to participate and the system has its own administrative board, which is independent of all other municipal and state employee retirement systems. Sorry folks; no blood is available from this much-maligned stone.
Since it was brought up, perhaps it’s a good time to set the record straight, because this myth of public school educators retiring and draining the towns for which they work is a prevalent and popular source of scapegoating.
To begin, teachers are required to contribute 11% of their salary to MTRS, which is independent of all other municipal retirement programs in Massachusetts. There is 0% employer contribution. Zero.
Most municipalities will use a third-party administrator for educators to optionally transfer pre-tax savings to a 403b account (the public sector and/or non-profit version of a 401k) if a teacher independently contracts with an investment firm. Again, the employer contribution to any such program is 0%. Given the ever-diminishing buying/saving power of educators whose COLAs do not even keep pace with Social Security COLAs, it is very difficult for educators to contribute to a 403b. Most of us do anyway – and it’s a hardship – but we know that it will be very difficult to make ends meet without it.
Here’s why… The 403b offers market-based growth, which is important for two reasons.
First, if a school employee hired before 2012 leaves their teaching job before 10 or 20 years of service (depending on the age when they started) or before the age of 55 or 46, respectively, there is zero pension benefit. (Educators hired after 2012 have even more restrictive minimum age and years of service requirements.) Teachers who retire between 20-30 years of service will collect minimal payments which are insufficient to live on. (In order to collect livable pension payments, a teacher must stay in the profession for a minimum of 30 years.) In any case, educators who find teaching unsustainable for 30 years may want to leave the profession sooner. In such a case, an educator may withdraw their contributions and transfer them to an investment-based retirement account. The problem is that the MTRS contributions, representing 11% of an educator’s salary, will not have grown like market-based investment accounts do. As an example, in the last year, my 403b account has grown by about 30%. While this was an exceptionally strong year of market growth for that account, in the same time period, my pension account has grown by 3%. If a teacher wants to leave teaching before reaching 30 years of service, there is no livable pension and they will need alternate income.
Second, teachers do not contribute to Social Security in their full-time employment. When I retire, unless I find another full-time job and work a minimum of 40 quarters, I can collect zero from Social Security. And until last year, even a teacher who had worked an additional job for the minimum 40 quarters could not collect their Social Security contributions, unless those contributions exceeded their monthly pension benefit, in which case that teacher could only collect the difference between the pension and what would be the Social Security benefit for any other non-teacher. After decades of the Big Bad Teachers’ Union lobbying, teachers who, say, work an extra 20-30 hours per week and/or or full-time during the summer in a non-public school job and are required to contribute to Social Security like every other worker in the United States, effectively would never get any of those contributions back. Teachers with 2nd and 3rd jobs, ironically, have been subsidizing the Social Security benefit of others for decades.
Yes, that’s right. Teachers are paid wildly less than similarly-educated/trained/certified workers in the private sector, to the point of often needing to work multiple jobs to make ends meet, and until last year those extra jobs compelled retirement contributions from public school educators, and those deductions were paid out in benefits to other people.
So, for the sake of focusing on real solutions to municipal financial strain, we must dispense with the idea that re-negotiating teacher contracts would be a worthy endeavor. We must consider alternative sources of savings.
FYI, clarification: I think there may be a misunderstanding. The observations on unsustainability of town budget and tax increases in my comments do not refer to your pension scheme. In my comments I am referring to the on-boarding of new employees at the town level.
Also, the links to other towns facing deficits, those links for Grafton, Lexington, and Whitman – Hanson are simply included as a sample set of what happens as a consequence of running a town-wide deficit. From Boston to the suburbs, many municipalities have decided to reduce school staffing as a consequence of these difficult times and budget challenges.
That said, ironically, the superintendent makes more than the Governor of Massachusetts. Townwide, there are a number of contracts that seem too high and should be brought to market in a normal bidding process and marked to market.
That said, having read your comment carefully, this retirement system from the bottom-up experience, as mandatory, sounds terrible. Googling it from the top down indicates the following information:
“MassPRIM (Mass Pension Reserves Mgmt Board) is investing in a highly diversified portfolio to support state pension obligations . . . totaling over $115 billion in assets as of early 2026.” And “The state retirement board draws roughly $800 million annually from the PRIT Fund to pay for retiree benefits, with the goal of becoming self-sustaining in about a decade. . .”
That is staggering in comparison to the educator’s experience related in your comment. Is there any published information or articles on educators meeting with the Board (the chair is the state treasurer) to relate concerns?
This dialogue is a little off topic from the Letter to the Editor. However, the numbers are staggering in light of the educators experience.
Thank you.
Thank you for sharing this detailed information. As the parent of a college student planning to become a teacher, I found it alarming, but helpful.
Erin
“We must consider alternative sources of savings” Ok, where would you suggest?
The reality is that about 2/3 of our budget is devoted to our schools. Of that the vast majority is salaries and benefits of school employees.
I am not advocating cutting teachers pay or benefits or for that matter the same for any other public employee. But the choice is stark, reduce services to satisfy our existing post employment obligations or substantially raise local taxes. The math is pretty simple but relentless.
The main point of your letter, it seemed to me, was to highlight the negative financial effect of retiree benefits on the town budget. One of the ones you mentioned in your letter was “unfunded pension obligations.”
Then, in a follow-up comment, you reference “the majority of our employees [who] are . . . the teachers” and suggest that their union will obstruct “any adjustment in our benefits package.” You go on to write that “even if we were to convert all of our employees to 401k type defined contribution plans we would have to come up with the employer share of the contribution and we would still have the requirement of funding the legacy retirement plans which will remain unfunded.”
Southborough does not contribute to MTRS (the Massachusetts Teacher Retirement System); therefore, the town has no unfunded pension obligation to MTRS. There would be no adjustment attempt for the “union” to obstruct because there is no financial relationship between the town and the educator pension system. The town contribution to MTRS is already zero.
With regard to teacher pensions, it’s a pretty good deal for the town already. The town pays teacher salaries and the teachers save for their own retirement themselves under very strict rules, without any employer contribution.
As for a source of savings, the town may wish to examine its underfunded obligations, certainly. But there exists no such obligation to teachers (as much as teachers would appreciate an employer contribution to their retirement savings!)