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Gov. Baker's Budget Will Include Early Retirement Push

In a bid to cut state government payroll costs and balance next year's budget, the Baker administration will seek to allow eligible executive branch employees to artificially add five years to their years of service or their age if they retire soon.

Gov. Charlie Baker is seeking to close a budget gap in the "ballpark" of $1.5 billion without drawing from reserves or raising taxes, and the budget plan would seek to reduce executive-branch staffing by 4,500 through early retirements. His budget is due Wednesday and the fiscal year starts July 1.

Baker's chief budget-writer said the staffing reductions would push state government toward more efficient service delivery.

"We'll have to certainly make some adjustments but that's a good thing. I look at that as an opportunity to make some changes, to bring some efficiency to state government," Administration and Finance Secretary Kristen Lepore told the News Service Monday. Saying she hoped there would be zero layoffs, Lepore said, "We're really comfortable that we can reach this number through early retirements."

The early retirements would fall between April 6 and May 29 under the plan, and the legislation authorizing early retirements would be filed in a separate bill from the budget.

This year's $36.5 billion state budget, which was approved last summer, has undergone midyear revisions to account for shortfalls totaling about $1 billion. Baker's annual budget proposal will be redrafted by the House and Senate this spring and likely land back on his desk in late June or July.

Administration and Finance spokesman Dominick Ianno told the News Service about 14,000 employees would be eligible, having already reached either 20 years of service or 55 years of age. The budget plan would allow early-retirees to add five years to their years of service or their age to boost their pensions.

Retiree pension payments are determined by a calculation based on salary levels, years served and the age of the former employee. The early-retirement plan in Baker's budget would not allow retirees to go above the maximum payments.

If the executive branch falls short of the 4,500 target, the state would use layoffs to make up the difference, Ianno said. Asked how many layoffs she expects, Lepore said, "We're hoping none."

The program is expected to net savings of $178 million after the costs of pension contributions, health care and a limited amount of re-hiring is factored in.

The plan calls for roughly $50 million to be added to the state's annual contribution to the pension fund for the next 15 years.

"Unlike the early retirements that were done in the past we are funding the pension liability in our savings so it will be built into the base," Lepore said. The additional pension costs would raise the floor of the state's pension contributions so next year "we don't need to find $50 million because it's already built into the base," Lepore said.

Staff reductions would more than pay for the additional pension costs, according to the administration's plan. The Baker administration plans to continue to realize $178 million in annual savings for the next three years, totaling $534 million in savings over that three-year span. Hires to backfill the positions lost to early retirement would be limited to costing 20 percent of the gross savings from the early retirement program.

The program would only be open to employees in the Group 1 pension classification. That includes "clerical, administrative and technical workers, laborers, mechanics," according to state law. Law enforcement, prosecutors and certain specialty positions are classified in different pension groups.

Lepore pointed to prior early-retirement offers and said she is not concerned that departments and agencies will have trouble keeping up with their responsibilities.

"When this happened 10 years ago we had almost double the amount of employees take advantage of it, and it wasn't a problem back then, so I really don't have any concerns," Lepore said. She said early retirement programs in 2002 and 2003 resulted in more than 7,000 employees making use of it.

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