AUGUSTA – Gov. Paul LePage will increase his personal contribution to the state retirement system if lawmakers want to add that provision to the two-year budget, his spokesman said.
“The governor would absolutely accept an increase in the pension contribution for chief executives,” said spokesman Dan Demeritt.
And if lawmakers want to include themselves and judges among those who should pay more, LePage would consider that as well, Demeritt said.
The discussion over who pays what — and who gets what — was sparked by LePage’s $6.1 billion, two-year budget. The contribution increase has been a major topic of discussion among lawmakers as they consider the proposal.
The state is looking to save money by requiring the 12,042 state workers and teachers in the state retirement plan to increase their contribution to the system from 7.65 percent to 9.65 percent of their pay.
By requiring employees to pay more, the amount taken from the General Fund for the retirement system would be reduced by $9.4 million in the next two years, said House Appropriations Committee Chairman Patrick Flood, R-Winthrop.
“Those savings help us with the $287 million in the state share of the pension,” he said.
With a salary of $70,000 a year, LePage is currently required to pay $5,355, or 7.65 percent of his pay, into the retirement system. If that was increased to 9.65 percent he would owe an additional $1,400 a year.
LePage’s original proposal didn’t include himself or judges because the budget team had to “stay focused on big-ticket reforms,” Demeritt wrote in a March 22 letter to the editor.
Some complaints have been raised whether it is fair that some in state government won’t be asked to increase their retirement system contributions.
If the state’s judges had to increase their contributions, it would save the state $135,000, according to the Maine Public Employees Retirement System.
A change for lawmakers would result in no savings because legislators are in their own plan, which is currently well funded due to frequent turnover, according to the Maine Public Employees Retirement System. As is the case with other plans, it takes five years to be vested, and many lawmakers leave before they qualify for benefits.
Another class of state worker — so-called “confidential employees,” who are not eligible to join unions — also would be required to increase contributions by two percentage points.
This includes about 1,000 employees who work in human resources, are involved in collective bargaining, or have major policy-making roles that make them privy to sensitive state information.
Their contribution level is currently 1.15 percent because of a 1981 deal in which the workers gave up a pay raise in return for the state picking up a larger portion of their retirement system contribution. Under LePage’s proposal, their contribution would rise from 1.15 percentage points to 3.15 percentage points.
Some lawmakers have raised concerns that because the 2 percentage point increase corresponds with a nearly 2 percentage point drop in the state’s contribution, the move would amount to a shift of the funding burden to current workers.
The 2 percent increase is just one part of proposed changes to retirement pension and health benefits included in LePage’s $6.1 billion, two-year budget.
His budget would freeze cost-of-living increases for three years for retirees and reduce the cap on those increases from 4 percent to 2 percent thereafter. It would increase the retirement age from 62 to 65 for new hires and those with fewer than five years of service.
Also, it would make changes in health care benefits for retirees. It would require longer terms of service to qualify for benefits, and future retirees would have to pay an increased share of their health insurance. Those who retire after Jan. 1, 2012, would have to pay 100 percent of their health insurance until they reach age 65.
The state faces a $4.3 billion unfunded pension liability that must be paid off by 2028. LePage’s proposal would reduce that liability by $2 billion and save $524 million over the next two years.
During a briefing of the Legislature’s Appropriations Committee last week, Sandy Matheson, the executive director of the Maine Public Employees Retirement System, told lawmakers she wanted to clear up misconceptions.
“The plan is not in danger of becoming bankrupt,” she said.
She also said the plan as “currently constructed” is sustainable. But the state now finds itself in a difficult spot because of the 2008 stock market decline that will make it more expensive to pay off the long-term unfunded debt by 2028.
“What is causing the problem is not the plan, but significant setback in the unfunded actuarial liability payment schedule,” she said.
Now that public hearings on the budget are over, lawmakers will be getting down to the hard work of hashing out a spending plan.
Flood, the House Appropriations Committee chairman, said the challenge is clear.
“Our job is not the rhetoric,” he said. “Our job is to find solutions. There will be tremendous forces working on us from all directions.”
MaineToday Media State House Writer Susan Cover can be contacted at 620-7015 or at:
scover@mainetoday.com
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