Lawrence’s Failed Public Pension System
by Guest Blogger Rohit Chaparala
Pioneer’s newest transparency tool, MassPensions.com reveals a pressing need for reform in Lawrence’s public pension system.
Launched earlier this month, the site allows Massachusetts residents to view details of public pension plans throughout the state, providing access to performance indicators including a plan’s financial condition, investment performance, and asset allocation. From this data, the site then generates an overall composite grade for the plan.
The City of Lawrence’s plan ranks among the worst in the state. Over the past five years (2008-2012), Lawrence’s public pension system has yielded a D, F, C, D, and an F.
Here’s a statistical breakdown: From 2009 to 2010, Lawrence’s funded ratio, the percentage of pension assets available to cover plan obligations, plummeted by 10 percent, dropping from an already dismal 49% to 39%. It’s remained stagnant since then, revealing a lack of sustainability in the current program.
Lawrence has consistently underperformed the public pension systems of other middle cities that have comparable populations and annual revenues. Chicopee’s funded ratio, for example, sits at 60%, 21 points more than Lawrence. Brockton, too, significantly outperforms Lawrence with a 72% funded ratio, 33 points higher than Lawrence. Even Fall River and Lynn, both at a meager 46%, top Lawrence. In relation to the rest of the Commonwealth, Lawrence ranked 103 out of 105 in terms of funded ratio in 2012, the worst of all Massachusetts cities its size.
Also worrisome is Lawrence’s distant 2038 funding deadline, the year at which the municipality projects all pension liabilities will be fully funded. All public systems in Massachusetts are required to be on track to be fully funded by 2040, so Lawrence has little breathing room.
Deferring the funding date would only exacerbate the city’s financial woes. In comparison to other cities its size, only Fall River would take longer to reach full funding. Chicopee plans to pay off its liabilities by 2026, Brockton has set its deadline for 2030, and Lynn projects to be fully funded by 2031. In this category, Pioneer Institute gave Lawrence an F for 2012, ranking it 95 out of 104.
Lawrence’s low funded ratio and late funding deadline translate to financial uncertainty. The numbers project a gloomy road ahead for the city, and as more time passes, the situation will only get worse. MassPensions.com is a wake-up call for the city’s leaders that it’s time for real, effective reform.
Rohit Chaparala is a student at Boston University Academy and a former intern at Pioneer Institute.