AUGUSTA — Teachers and state workers are unhappy with proposed changes to the state retirement system and are likely to show up in droves next month at public hearings on the topic, their union representatives said Thursday.
“It’s going to be fairly ugly through the process,” said Steve Crouse, director of government relations for the Maine Education Association. “People are just going to get angrier and angrier.”
Crouse and other state union representatives offered input Thursday on the retirement-system changes proposed by Gov. Paul LePage before the Legislature’s Appropriations Committee. The committee spent two days reviewing a host of potential changes to the system contained in a study prepared by the Maine Public Employees Retirement System.
The committee must first decide whether to endorse changes contained in LePage’s $6.1 billion two-year budget that goes into effect July 1.
LePage wants to freeze cost-of-living increases for retirees for three years and cap annual increases at 2 percent after that. Currently, retirees can receive cost-of-living increases of up to 4 percent.
LePage also wants teachers and state workers to contribute an additional 2 percent of their pay into the retirement system, and to raise the minimum retirement age from 62 to 65 for new hires and workers with fewer than five years of seniority.
The changes aim to lower the state’s annual costs immediately and to reduce the state’s long-term liability by $2.5 billion. The state constitution requires that the retirement-system debt — now pegged at $4.4 billion — be paid off by 2028.
In addition, LePage is proposing to make changes to the state retiree health insurance system aimed at reducing debt by nearly $1 billion.
Those changes include requiring more years of service before qualifying for benefits, and having future retirees pay a larger share of their health insurance premiums. A phased-in health benefit based on years of service would apply to new and recent hires.
About 28,000 retired teachers and state workers would be immediately affected by the changes. Representatives of the Maine State Employees Association and the Maine Association of Retirees also spoke to the committee.
Crouse said the most troubling aspect of the LePage proposal is the lower cost-of-living increases. While the cost of food, fuel and other staples continues to go up, retirees’ pensions won’t keep pace, Crouse said.
“It’s not a rational proposal,” he said.
He also called increasing employee contributions to the retirement system from 7.65 percent to 9.65 percent “a tax,” because it would decrease salaries without providing any benefit to employees. The 2 percent increase corresponds with a 2 percent decrease in the state contribution.
Florence Hoover-Johnson, executive director of the Maine Association of Retirees, which represents 15,200 retired local, state and county employees and teachers, said the changes would be “devastating.”
“Nobody’s putting money into their savings on retirement,” she said. “They are just living on it.”
Lawmakers thanked the groups for their input, but warned teachers and state workers that the system must be changed. They said they were willing to consider options other than those proposed by LePage.
“I don’t think the option is not doing anything,” said Rep. Ken Fredette, R-Newport.
Mary Anne Turowski, legislative and political director for the Maine State Employees Association, agreed with Crouse that members will be upset when public hearings on this part of the budget are held March 2 to March 5.
“They are hurt,” she said. “They are angry.”
MaineToday Media State House Writer Susan Cover can be contacted at 620-7015 or at:
scover@mainetoday.com
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