March 13, 2011

MIKE TIPPING: LePage exempts own pension from budget cutbacks

Mike Tipping

Under Gov. Paul LePage's proposed budget, teachers and other state employees will be required to increase their contributions to the pension system, from 7.65 percent of their salary to 9.65 percent.

One public employee currently paying 7.65 percent, however, won't see an increase.

The governor has exempted himself.

While public employees and teachers face this increase, as well as a raise in the retirement age, a freeze on cost-of-living adjustments for current retirees and a 2 percent cap on future cost of living increases, LePage's personal contribution rate to the retirement system will remain the same, which means he'll be paying $21,420 over four years.

If LePage faced the same increase as state employees, it would cost him $5,880 over his term.

Unlike teachers and state employees, however, the size of the governor's pension doesn't depend on how long he pays into the system. As soon as he leaves office, he'll begin receiving a three-eighths of his salary, which works out to $26,600 annually.

For comparison, a Maine teacher would have to work for more than 25 years to receive this level of benefits.

Confidential employees, those that are not represented under union collective bargaining, also are not seeing their salary contributions increased to the same rate. They'll continue to pay just 3.65 percent of their salary to the pension fund.

At the same time that most employees are to be forced to increase their contributions, the state will reduce the amount it pays into the retirement fund.

Maine currently contributes 5.5 percent of an employee's salary, less than the 6.2 percent it would have to pay if these workers were enrolled in Social Security rather than the more efficient state pension system.

It is difficult, then, to take LePage seriously when he says, "I know some teachers and retirees are struggling, but we need honest and shared solutions to solve our pension problem," as he did last week, or when his spokesperson talked about "shared sacrifices" as they announced the budget.

LePage's budget shows the same lack of fairness on a larger scale as well. Last week, LePage's commissioner of the Department of Administrative and Financial Services, Sawin Millett, explained that the money raised from these payment increases on teachers and public employees isn't targeted to shore up the state's pension system, but will instead pay for other budget priorities, including $203 million in tax cuts.

Maine's wealthiest residents will benefit the most from these cuts. One percent of households, those earning more than $360,000, will see their income taxes go down by $2,700. The budget also would double the size of estates that are exempt from the estate tax from $1 million to $2 million, a provision that would benefit only about 550 Maine families and cost the rest of us $30 million.

Overall, about half of the benefits of LePage's proposed tax cuts would go to Maine's richest 10 percent.

Amplifying this vast shift in money toward those who need it the least, LePage's budget also would cut funding for the Maine's property tax refund program, which helps families keep their homes, and roll back prescription drug coverage for seniors and health coverage for working families.

Compared to the size and scope of these misplaced priorities, LePage exempting himself from having to pay the same increase as other public employees doesn't seem like that big of a deal.

It does show, however, just how deaf the governor is on this issue. He could have made political hay by trumpeting the fact that he will be suffering right along with the teachers of Maine. That kind of anecdote might have helped people to ignore the larger unfairness of his budget.

And, in the end, it really is a question of fundamental fairness. These public employees have made contracts to serve the people of Maine in exchange for compensation and benefits that all parties agreed on. State employees earn less than their private-sector counterparts earn, and part of the way Maine is still able to attract dedicated public servants is by letting them know that their retirement savings will be kept safe and will guarantee them a reasonable retirement.

Over the past eight years, Maine's teachers and public employees already have been subject to more than $150 million in takebacks to their wages and benefits.

For LePage to go after their pensions again in order to fund tax cuts for the wealthy isn't right, and for him to exempt himself from the same cuts is both bad politics and bad policy.

Mike Tipping is a political junkie. He writes the Tipping Point blog on Maine politics at DownEast.com, his own blog at MainePolitics.net and works for the Maine People's Alliance and the Maine People's Resource Center. He's @miketipping on Twitter.

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