Maine public pensions

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Maine public pensions are part of the Maine State Employees' and Teachers' Pension Plan. Approximately, 26,000 active public employee retirees have contributed $900 million into the MainePERS, but the Maine Heritage Policy Center projects the lifetime benefits for retirees to cost an estimated to be $15.4 billion.^[1] The cost of pension benefits is expected to increase $287 million for the next budget, costing a total of $916 million.^[2] More than 11,000 public employees in Maine will collect lifetime pension benefits of more then $500,000.^[3] Also, more then 50 percent of public employees collecting pension benefits worked for the government less then 25 years.^[3]

Maine has 28,077 total public employees as of 2010.^[4] In Fiscal Year 2010, the state has a total of 58,584 active and inactive pension fund members, with 35,846 receiving periodic benefit payments. ^[5]

Maine's Public Pension Plans

State/ Teacher Plan

The Maine State Legislature established a defined benefit retirement plan for state employees and teachers (the “State /Teacher Plan”) with the intent to encourage qualified persons to seek and to remain in public employment and to assist employees in providing for their retirement. All employers are required to participate in Social Security or offer a qualified replacement plan.

Current law provides that the State pays 5.5 percent of payroll and the employee pays 7.65 percent of salary in the State/Teacher Plan. In addition, both the employee and the employer pay an additional 1.45 percent Medicare payroll tax for employees hired after 1986.

Funding levels

For every dollar that public employees put into their pension funds, they receive $17 in lifetime pension benefits in return.^[1] The total contribution by active retirees was $882,274,785, less then 6 percent of the total pension costs.^[3]

The state's pension liabilities can be calculated in a variety of ways, which yield different numbers. Below are the numbers as calculated by to the Pew Center on the States^[7], the American Enterprise Institute^[8] and Professors Robert Novy-Marx of the University of Chicago and Joshua Rauh of Northwestern University, Kellogg Graduate School of Management.^[9]

Other information from the Pew Center on the States Feb. 2010 publication "The Trillion Dollar Gap":

This data is based on projected data from 2008 census data.^[11] In 2008, $1.94 trillion was set aside for pensions, but it is estimated that states have $5.17 trillion in unfunded liabilities.

State Treasurer Bruce Poliquin says the state pension system is fiscally unsustainable. "This is what keeps me up at night," Poliquin said. "This $4.3 billion piece of our overall state debt was created by past state governments which promised taxpayer-funded retirement benefits without setting aside enough money to pay the bill." Poliquin says the state's pension system can't continues as is. ^[12] He called the pension shortfall the most critical chunk of Maine's total debt, which totals $12.7 billion. ^[13]

The state has underfunded the system; for decades, public employees had their required contributions — now at 7.65 percent — taken out of their checks and put into the system. Gov. Paul LePage proposed, as part of his budget, that the state’s share would drop from 5.5 percent to 3.5 percent, while the employees’ contribution would increase by 2 percent. Rather than collecting more money to pay down the unfunded liability, that proposal uses funds the state should be contributing to the pension fund to finance other state actions such as tax cuts. ^[14] LePage originally proposed that most state employees give almost 10 percent from their paychecks to cover their pensions and pension debt, although some would only provide 3.5 percent. ^[15] Regular employees now pay 7.65 percent of their pay into the pension fund and the state adds another 5.5 percent. Under LePage's proposal, the 7.65 percent would increase to 9.65 and the state share would stay the same. The additional millions raised by the increase would help pay off the $4.4 billion pension debt. ^[15]

Those representing public workers say LePage's plan is not fair. Two labor unions have proposed a plan to make significant cost savings in the current budget, says Gray, something that will require employees to endure a one-year freeze in the cost-of-living allowance, and to reduce the cap on future increases in that allowance from 4 percent to 3 percent. The plan also projects a hefty decrease in the state's Unfunded Actuarial Liability. Union leaders say their plan saves at least $287 million, and reduces the long-term unfunded actuarial liability by about $1.2 billion. ^[16]

Rate of return

Maine presumes a 7.75% rate of return on its pension investments.^[10]

Benefits

The Maine Heritage Policy Center said that the almost 26,000-plus individuals currently enrolled in the Maine Public Employees Retirement System will received a combined $15,383,315,649—an amount equivalent to $11,834 for every man, woman and child in Maine. On average, for every $1.00 withheld for their paycheck while working, government retirees will get back $17.00 in lifetime pension benefits. For some government retirees, for every $1.00 paid into the retirement system, they will get back more than $300.00.^[17]

Cost of living increases

The FY2012-13 state budget passed on June 20, 2011, freezes increases in state worker pensions in FY2012 and from thereon out it limits cost of living adjustments to three percent.^{[18] [19]}

Local public pensions

Main article: Local government public pensions

According to the United States Census Bureau, the state has no locally-administered pension plans.^[20]

Pension reforms

2012

February 13, 2012

The Maine Association of Retirees filed a class action lawsuit in Federal District Court in Bangor, challenging the pension cutbacks introduced last year by Governor Paul LePage in legislation enacted as part of last year’s biennial budget.

As part of the solution for balancing the budget, retired state employees and public teachers had their annual cost-of-living adjustment (COLA) eliminated for three years and thereafter reduced to 3 percent on the first $20,000 of retiree’s pension. The complaint was brought against the Maine Public Employees Retirement System Board on behalf of 28,000 retired state employees and public school teachers.

The complaint also alleges that the amount of money saved by this measure over two years—about $48 million—is dwarfed by the $88 million lost as a result of reducing taxes on high-income Mainers. Oppositely, opponents argue that the pension system is in drastic need of repair, in addition to the major budget gap that the state faces. Chief Economist with the Maine Heritage Policy Center points out that the state is constitutionally obliged to pay all of its pension debt by 2028, and says this could not happen without the type of cuts introduced last year.^[21]

March 11, 2012

Ten Maine public employees took in an average of $168,000 each last year by collecting a salary and a state retirement pension at the same time.

Of those ten—including seven school superintendents and one assistant superintendent—top the list of Maine’s double dippers, whose numbers reached 1,228 in 2011. That number does not include the public sector employees now collecting salaries from 488 municipalities while also collecting benefits from the state pension program. Most of the double dippers (86%) work for Maine school districts.

Defenders of the practice say it keeps experienced and skilled employees in the work force. Critics say that public employees are taking advantage of the system to get hefty pay raises and their refusal to retire is keeping out younger workers.

A member of the Maine legislature—Sen. Dawn Hill—introduced a bill (L.D. 1632) limiting post-retirement service to five years and prevents retirees returning to work from getting health insurance. Currently, it is pending before the Appropriations Committee, and is still subject to amendment.^[22]

March 11, 2012

A report submitted to the Maine legislature last week describes a new possibility for retiring the state’s 70-year-old pension system, in response to drastic underfunding. Phasing out the old pension system and starting up a new one for new workers—freezing enrollment in the $10 billion system—will not impact the 27,800 retirees enrolled in the state’s Public Employees Retirement System, including teachers, school administrators, state employees, municipal workers, legislators and judges. The average state pension is about $19,693 per year.

Workers contribute 7.65 percent of their salaries. The state has historically kicked in 5.5 percent as its regular share, plus an additional amount to correct for past underfunding. That underfunding put the pension system in financial jeopardy in the 1990s, when Mainers passed a constitutional amendment to fully fund the system by 2028. The financial rebuilding plan was largely on track until the 2008 stock market crash reduced the pension fund’s assets again.

The new system would require the state to pay 6.2 percent of salaries as its Social Security contribution, plus another 2 percent for its share of the supplemental retirement plan, according to the report. The supplemental plan would work somewhat like a private retirement plan, but with a partial guarantee of future benefits.^[23]

Litigation

A 2012 lawsuit, Maine Association of Retirees v. Maine Public Employee Retirement System will determine Whether the legislature may constitutionally eliminate retired state employees’ and public school teachers’ COLA for three years and thereafter reduce the adjustments to 3% on the first $20k of a retirees’ pension. Prior to the change, the retirement system was authorized to grant COLA of up to 4 percent per year. While the case is pending in Maine District Court, a motion for leave to intervene was filed April 4, 2012 by Plaintiffs to allow additional plaintiffs to intervene, arguing that participation of additional union-intervenors will help to develop facts. The motion can be found at the link. ^[24]

Local public pensions

Main article: Local government public pensions

Transparency

Main articles: Public pension disclosure and Governmental Accounting Standards Board

Data availability

Information including annual reports, investment performance, Freedom of Information applicability and more is available on the MainePERS fund website.^[25] MainePERS is required to comply with the state's Freedom of Information law.^[26]

Names of recipients are available under the state's Freedom of Information law.^[26]

Amounts disbursed to recipients are available under the state's Freedom of Information law.^[26]

Fund performance data

Investment performance data is available under the investments section of the fund's website. Details include annual reports, quarterly historical performance, asset allocation, and more.^[27]

Rate of return

The assumed rate of return is posted in each year's Comprehensive Annual Financial Report.^[28]

Unfunded liabilities

Unfunded liabilities are posted in each year's Comprehensive Annual Financial Report.^[28]

Oversight

State law prohibits pension fund managers, board members, and all public officials from giving or receiving gifts or contributions with the intention of pecuniary benefit.^[29]

An independent auditor's report is included in each year's Comprehensive Annual Financial Report.^[28]

See also

• Maine state budget
• Maine state government salary
• Maine Heritage Policy Center
• Maine Center for Open Government- Maine Heritage Policy Center

External links

• Maine Open Gov - Pension information
• MainePERS.org
• Maine State Pension Fund Management - State Integrity Investigation

References

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