The State House News Service is reporting that Governor Patrick is looking to have pension legislation ready for the Legislature by January that would extend the full funding schedule to 2040 and help the Commonwealth as well as localities avoid the large spike coming in pension payments next year due to the system wide losses incurred by Massachusaetts pension systems. The story estimates that Massachusetts will have close to a billion dollar increase in pension liability under the current schedule. Localities are facing huge increases as well, and as I have pointed out in prior posts these costs are not affordable or sustainable under any economic model that I am aware of.

On the heels of investment losses of up to 30 percent at state and local public pension investment funds last year, the state’s unfunded pension liability rocketed to more than $22 billion on Jan. 1, 2009, up from $13.4 billion four years earlier, according to state financial disclosure documents. Investment gains this year closed some of that gap.

The state’s largest pension fund, the Pension Reserves Investment Trust, shed $15.9 billion in 2008, falling from $53.7 billion to $37.8 billion, a 29.4 percent fall. Smaller, locally managed funds posted similar losses.

Cities and towns, stung by the local fund losses and cuts in financial aid from the state, are appealing for relief from current funding schedules, which call for appropriations increase in some communities of up to 50 percent in the fiscal year that begins in July 2010.

The Governor is correct to seek relief from the current schedule, but this proposal will not be a panacea. Expenses will continue to outstrip revenue in this area, and eventually something will have to give. Localities need this extension, but the long term problems remain. Major change will eventually come, but for now the extension will have to do.