US - Surging pension and personnel costs have significantly depleted Boston's fiscal budget, a report by Boston Municipal Research Bureau (BMRB) has found.
Expenditure on pensions has increased by 46% since 2001, while health insurance costs have risen 73% over the same period. The city of Boston raised its 2006 fiscal budget by US$119.5m, but 85.6% goes directly into pensions, salaries and health insurance.
A similar pattern was carried through the past five fiscal years since 2001.
The 2006 fiscal budget has seen a significant increase of $39.7m (27.1%) for pensions, which BMRB attributed to the weakness of recent pension investment performance, reflecting the market, and the impact of the Early Retirement Incentive (ERI) programme of 2002.
The city is required to update its State-Boston Retirement System (SBRS) pension-funding schedule every three years and this rise in pension costs comes in the first year of the new schedule.
The second and third years of this three-year schedule are expected to increase by just under $10m in both fiscal years 2007 and 2008.
According to the report, the SBRS has managed its retirement system “during recent difficult times, adhering to its pension funding schedule that will reach full funding with no unfunded liability by 2023.”
The report found the Boston pension system is scheduled for full funding but costs are escalating and the funded ratio is low, and BMRB included a number of recommendations to counteract this issue.
The City of Boston should remain absolutely committed to the SBRS’s plan toreach full funding of its pension liability by 2023 - or even earlier should investmentperformance improve, it said.
City officials were also advised to resist any efforts to modify collective bargaining contracts, which would expand benefits that could increase compensation and be considered pension eligible.
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