A brand new report by a Boston-based suppose tank has discovered that the MBTA plans to undertake what it described as an “ill-advised, quick-fix” method to repay its $1.3 billion unfunded pension legal responsibility by taking out extra debt.
According to the Pioneer Institute report, “Rolling the Retirement Dice,” the MBTA just lately requested bids from funding banks, with the intention of in search of managers for a $360 million taxable pension obligation bond problem.
“Under this gambit, the Authority would borrow money to eliminate a portion of an unfunded long-term pension liability estimated at $1.3 billion, or nearly triple its total payroll,” the report states. “For the MBTA, a pension obligation bond would be a wrong turn at the worst possible time.”
This method would compound the monetary threat already constructed into the T’s pension calculations, which assume its retirement fund will earn 7.25% yearly, “a gamble with especially long odds in the current financial and economic climate,” the report states.
“It would be much like taking out a home equity loan to pay off a credit card balance,” the report mentioned.
The research discovered the MBTA retirement fund is projected to require $3.07 billion to cowl pension bills by means of the lifespans of its youngest vested workers, however its property come up $1.3 billion brief. When accounting for a extra conservative 4% charge of return, the T’s whole pension legal responsibility rises to greater than $4 billion.
Study creator E.J. McMahon mentioned if the T desires to repay its pension debt, it ought to discuss to the union and reconfigure advantages to cut back long-term prices. Employees may additionally contribute extra to the retirement fund, which he mentioned is unlikely since they already kick in 9.33% of their salaries.
McMahon mentioned the issue comes all the way down to poor funding administration and the T underfunding its retirement fund by $66 million from 2007-14. Employee pension advantages additionally proceed to develop at an unsustainable charge, he mentioned.
The T is reviewing the Pioneer report, and contemplating among the choices it raised for significant reforms, however “at this time, given rising interest rates, the MBTA has no plans to pursue pension obligation bonds,” spokesperson Lisa Battiston mentioned.
Collique Williams, spokesperson for the Public Transit Public Good coalition, mentioned on behalf of the Boston Carmen’s Union that “for years, the discredited Pioneer Institute has advocated for defunding the MBTA and slashing worker rights and benefits.”
“Pioneer is not a watchdog by any measure,” Williams mentioned. “They are a public relations front group peddling bad data and bad policy to distract from the urgency of investing in public workforces and infrastructure in order to ensure the good service and good jobs that our communities need.”
Source: www.bostonherald.com”