“Why are my taxes so high?” Fair question! There are about three budget busters driving your high taxes but there is one in particular I want to highlight. When it comes to your property tax there’s a little-known but very substantial contributing factor: the public employee pension appropriation.
Unlike public safety, schools, or roads, the City’s annual appropriation to the public employees’ pension fund is felt but not seen. The burden this appropriation places on property owners is not only heavy, it’s unreasonable. Here’s why:
Massachusetts property taxpayers are taking a double hit. They are paying into their municipalities’ pension funds to cover the retirement of today’s municipal employees, but they are also making up for multiple generations of underfunding. I’ll say that again: Massachusetts property taxpayers are required to shoulder the very heavy cost of correcting a long history of underfunded pension plans. Previous generations of leaders promised the benefits of public pensions without fully paying for them. This has resulted in unfunded liabilities that present-day taxpayers are told must pay. In plain language, previous generations kicked the can down the road.
This heavy toll hits Gateway Cities, such as Holyoke, hardest of all. Manufacturing is much diminished here as in most other Gateway Cities, and as manufacturing jobs went away, the population declined steadily from 60,000 in 1920 to a little over 38,000 today. Bottom line: pension obligations taken on when Holyoke was prosperous and populous are being paid down be fewer residents who have less wealth.
The State of Massachusetts has been very firm in recent years when it comes to public employee pension plans. Each city’s share must be paid — no exceptions, no reduction in payments, no slack even if we’re having a bad year. A lawyer consulted on the question of a reduced appropriation described the obligation as “sacrosanct.”
Holyoke’s tab for Fiscal 2026 is $13,147,588. If previous generations of City leaders had fully funded the employees’ pension obligation, that figure would be around $4 million. That means I have to raise and appropriate through taxation an additional $8million to go into this retirement savings account. Do you know what we can do with that $8million? For starters, how about giving it back to the tax payers in a reduction of their property taxes? It’s about .5% for every $600,000 so imagine how much of an impact $8million can have!
The State has directed us to pay off the past liability and remain current by 2036. A tour present aggressive pace of payment, Holyoke’s pension plan should be balanced by 2033. Eight long years from now…
Is there relief … a bright spot? Not really. One comprehensive study of the issue from Mass, Inc. urges transparency to ensure taxpayers are informed about the pension obligation and its very real cost. Another suggestion is to allow communities to exclude historical unfunded pension liability costs from the Proposition 2½ levy limit. But that’s not a solution. It might hasten the elimination of the deficit, but current taxpayers would still be required to shoulder the burden. A third suggestion is centralizing the City’s pension assets with the State’s Pension Reserve Investment Management Board with the goal of achieving improved investment returns, but our own Retirement Board’s investments already outperform the State’s.
We will continue to keep Holyoke residents informed on all aspects of this vexing obligation that brought about by actions — actually, inactions — made before many of us were born.