Examining the City of Newton's Pension Plan Problems

In the wake of Newton voters prudently voting to reject the $9.175 Million operating override proposed by Newton Mayor Ruthanne Fuller and the Newton City Council, Newton responded by adjusting its pension plan funding timetable. This resulted in Newton reducing its pension plan contribution growth rate from 9.6% to 6.6%, which freed up funds in the operating budget, but resulted in a later date in which the pension plan's assets were estimated to equal its liabilities.

The Newton Contributory Retirement System owes $334 Million (nearly $11,000 per household) as of December 31, 2022 to its pension plan in order to prefund the pension benefit payments of its current and future retirees and their beneficiaries ($329.7 Million to City of Newton retirees and another $4.3 Million to Newton Housing Authority retirees). Over the last 10 years, the liability owed to city retirees has been an average of $302 Million and ranged from a low of $246.9 Million in 2021 to a high of $338.25 Million in 2018.

In 2015, Former Newton Mayor Setti Warren announced a plan that projected that Newton would be able to retire its pension plan liability by 2029. He planned to achieve this by increasing the amount Newton spent on its pension plan trust fund contributions by 8.75% from 2015 to 2029. Although Newton ended up increasing its annual pension plan contributions from $20.25 Million in 2014 to $43.5 Million in 2023 and its gross pension plan assets from $294 Million in 2014 to $474 Million at the beginning of 2023, the net underfunded liability grew from $284 Million in 2014 to $334 Million at the beginning of 2023 due to the lavish pay raises that former Mayor Warren and current Mayor Ruthanne Fuller gave to the unions and bureaucrats, which helped boost the gross pension liability from $578 Million in 2014 to $808 Million at the beginning of 2023.

Newton's elected public servants could have maintained its previous trend of increasing the contribution rate by 9.6% to try to retire the pension plan liability by 2030 if they had the political will to address Newton's structural spending problem due to the lavish compensation packages it provides to its unions and bureaucrats. Unfortunately for Newton taxpayers, Newton's political class learned nothing and forgot nothing from the voters defeating the operating override and continue to give lavish pay raises to the unions and bureaucrats and maintain providing $13 Million in annual educational subsidies to 646 non-resident students who don't live in Newton, whose parents don't pay Newton property taxes, but attend Newton Public Schools.

In order to solve Newton's pension plan problem, Newton's elected and appointed public servants need to tell the unions that their demands for lavish, double-digit cash salary pay raises are extremely unaffordable to Newton taxpayers. The Newton teachers union's demand for a 10% combined cash pay raise (between COLAs and Step Raises) for 2024 is not only risible, but it demonstrates the kind of arrogant attitude the unions have towards the taxpayers that made Proposition 2.5 possible in the first place.