April 29, 2011

State unions offer counter pension plan

By Susan M. Cover scover@mainetoday.com
State House Bureau

AUGUSTA -- Unions representing teachers and state workers proposed a set of scaled-back changes to their retirement benefits Thursday to counter a proposal put forward by Gov. Paul LePage in his two-year budget.

The Maine State Employees Association and the Maine Education Association said they are willing to freeze cost-of-living increases for one year, reduce the cap on future increases from 4 percent to 3 percent and require workers to reach their normal retirement age -- either 60 or 62 -- to receive the state contribution toward their health insurance before they reach age 65.

The union officials emphasized their position that the retirement system -- which has a recently recalculated long-term debt of $4.1 billion -- is financially sound, but they said they were willing to accept changes to the system to cover a deficit created by the stock market declines of 2008.

The unions recognized the need to made some modifications to put the state on a path to pay off short and long term debt by 2028, which is required by the state constitution.

"Even though teachers, firefighters, snowplow drivers and child protective workers did not cause the unfunded actuarial liability, we are here today to put forward our solution to help bridge the current recession and cover the increased cost to the state of Maine, which are generated by the 2008 market declines," said Chris Quint, executive director of MSEA, at a State House news conference.

The changes proposed by the unions total $213 million in savings for the upcoming two-year cycle and a $1.2 billion reduction in the long-term unfunded liability.

That amount of savings, particularly the $213 million, isn't enough, said Sawin Millett, commissioner of the state Department of Administrative and Financial Services.

"We booked more than $410 million in savings," Millett said. "Anything that falls short of that is a nonstarter."

Millett did express a willingness to consider changing the governor's proposal with regard to health insurance. As currently proposed, his budget would require teachers and state workers who retire prior to age 65 to pick up the cost of their health insurance. As it is now, the state picks up 100 percent for state workers and 45 percent for teachers prior to 65.

The administration may propose a change similar to what the unions are proposing next week when it rolls out a series of modifications as part of a change package to the budget.

"It's something we've looked at and are in the process of costing it out," Millett said.

The $6.1 billion, two-year budget includes a series of changes to the retirement system both to save money in the short term and to reduce the long-term debt.

LePage is proposing to freeze cost-of-living increases for three years and cap the increases at 2 percent thereafter. The budget requires current employees to increase their contribution to the system by 2 percentage points, which corresponds with a nearly 2-percentage-point drop in the state share.

It also increases the retirement age to 65 for new hires and those with fewer than five years experience.

Millett said the budget is built around the retirement system changes, which pay for $203 million in tax cuts.

"The entire budget is predicated on that level of savings," he said. "You start moving dollars around by hundreds of millions, it's like starting from scratch."

The union representatives said it's not fair to require state workers and teachers to cover the cost of tax cuts.

"We don't believe that raiding the retirement system and cutting benefits for retirees is an appropriate way to fund the other priorities the administration has put forward," MEA Executive Director Mark Gray said.

The union officials said they would be willing to consider other changes -- such as raising the retirement age, the possibility of introducing Social Security, or a constitutional amendment to extend the payback period -- at stakeholder meetings that could be held once the budget is settled.

"We think the Maine Public Employee Retirement System is well managed and is in sound fiscal health," Gray said. "This is not a crisis that we are facing. The pension system is not on the verge of bankruptcy."

Susan Cover -- 620-7015

scover@mainetoday.com

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