Massachusetts Gov. Charlie Baker’s proposed early retirement incentive would increase the commonwealth’s unfunded pension liability and could jeopardize its bond rating, state Treasurer Deborah Goldberg told lawmakers recently.
“While the governor’s [proposal] may offer significant savings in the short term it also may create new potential problems in the long term,” Goldberg told members of the legislature’s joint ways and means committee March 10. She said the proposal would spread the state’s repayment plan out over 15 years.
Baker filed a bill to allow 4,500 state employees to retire early with higher pensions as a step toward closing a $1.8 billion structural deficit for fiscal 2016, which begins July 1.
Moody’s Investors Service rates Massachusetts general obligation bonds Aa1. Fitch Ratings and Standard & Poor’s rate them AA-plus.
Goldberg, who took office in January, warned against continued reliance on diverting capital gains tax revenues over $1 billion from the rainy day fund.
She supported the move in fiscal 2015 given “extraordinary circumstances” of few options and little time to balance the budget. “But I am worried that reliance on such a practice will raise red flags to the same rating agencies that have praised our mutual commitment to growing the rainy-day fund.”
Massachusetts is one of a few states with a rainy-day, or stabilization fund, of more than $1 billion.
