PEABODY — A vote by the Finance Committee not to ask the Retirement Board to reconsider offering a one-time 5-percent cost-of-living adjustment (COLA) increase prompted a broader call from City Councilor-at-Large Anne Manning-Martin for the city to reform its pension system.
Manning-Martin on Tuesday called the Finance Committee’s vote “not the right thing to do.”
She noted that the City Council was quick to approve a $7.2 million open-space purchase proposed by Mayor Edward A. Bettencourt Jr. at the same meeting, but tightened its purse strings with regard to the COLA.
Manning-Martin said the city needs to take a long, hard look at the state of its pension system, particularly given that the Retirement Board felt the system was in such dire shape they could not take advantage of the one-time raise prompted by the state.
“The opportunity came forward for us to give an extremely minimal COLA bump for seniors who have been retired for decades that really would’ve benefited from a small amount, and the Retirement Board chose not to do that. Why?” Manning-Martin asked.
The COLA issue came before the Finance Committee, a sub-committee of the City Council comprised of five councilors, during its April 27 meeting. There, Retirement Board Director James Freeman told the council that the city’s retirement system is less than 50 percent funded, and Finance Director Mike Gingras said the system lost $27 million due to declining investments. Other communities’ systems are closer to 65 percent funded.
“We … have a long way to go to fund the pension system,” Freeman said.
He explained that the city has typically made the minimum contribution year-over-year instead of trying to get ahead of fully funding the system.
The financial hole the system faces is fueled in part by growing pension payments.
Freeman explained that the 88 retirees or survivors who passed away between January 2021 and April 2023 were making in the “$1,500 neighborhood.” The 106 retirees or survivors who entered the system during that time period make more than $3,000, he said. In fact, he said the pensions paid out by the city in 2022 totaled $23.075 million.
“We need to stop creating and adding positions to a pension system that can’t support existing members,” Manning-Martin said. “To not do so is irresponsible and reckless.”
As a result, Freeman had to withdraw funds from the board’s investments to meet payroll, which seemed to set off alarm bells from councilors, with Manning-Martin calling it a “red flag.”
Gingras explained that doing so had become common practice.
“There’s a gap that, traditionally, the investments themselves have grown throughout the year to far exceed that,” he said.
The council heard from Ken Jones, a retired Peabody police officer who now lives in Salem. Jones said the additional 2-percent raise would’ve amounted to a $300 increase.
“This is the little guy that doesn’t make a big pension and $300 would probably make a big difference to them,” Jones said.
He added that 68 municipalities, including Lynn and Saugus, approved the increase.
Ward 6 Councilor Mark O’Neill said while the increase appears an “easy ask,” it would be unwise to put another strain on the pension system.
“This is a small percentage increase, but isn’t the position we should be taking for the long-term viability of the entire retirement system for all employees,” he said.
Councilor-at-Large Thomas Gould made a motion to ask the Retirement Board to reconsider its 4-1 vote against the increase, but it was defeated, with only Gould and Manning-Martin voting in favor. Councilor-at-Large Jon Turco and Ward 2 Councilor Peter McGinn voted against the motion, while Ward 5 Councilor David Gamache voted present. The resulting 2-2-1 vote left the motion dead in committee.
Gamache did not return a request for comment on why he voted present.
Manning-Martin said she was surprised by his vote, but not those of Turco and McGinn, who had been consistent in their opposition to the increase.
Despite the motion failing, she said “the alarm has been sounded.”
“We need to take a hard look at the status of the pension system for Peabody and see why it is other communities were able to take advantage of the one-time increase,” she said. “I think it’s fair for us to take a look at and figure out why we didn’t.”
Manning-Martin noted the city gives automatic 3-percent raises to department heads earning more than six figures without blinking, but couldn’t find the money to help retirees.
“We should fix this, we should repair it, and we should take care of our seniors on fixed income,” she said.
