Gov. LePage Clashes With Retired State Workers at Appropriations Committee Hearing
Retired state workers and teachers were out in force Wednesday to testify against Gov. Paul LePage’s proposed state budget. They were surprised when the governor personally came before the Appropriations Committee to defend it.
The Maine retirement system, which covers state workers and most teachers, was in crisis eight years ago when the national economic downturn slashed returns on its investments. The solution, after lengthy debate, was to scale back benefits. That reduced red ink in the system from over $4 billion to a projected $2.4 billion. Lawmakers also capped any future increases in benefits at 3 percent instead of 4 percent. Those increases only apply to the first $20,000 of annual retirement income. The law was also changed so that new workers and teachers, or those with less than five years of service must turn 65 before they qualify for benefits.
Retired state worker Frank Kadi, of Gorham, says there has been no permanent cost of living adjustment since then.
“The governor’s proposal to freeze the retiree COLA for two more years would make it even harder for retirees to catch up with the cost of living.” Kadi says.
Lawmakers did appropriate funds for one percent payments that were not added to the base income for retirees over the last several years. Retired teacher Tom Moore blasted the governor for his budget proposal to freeze any cost of living adjustments for two more years.
“There is something inherently immoral and unjust in the budget proposal put forth by Maine’s chief executive which would seek to freeze the COLA for the next two years.” Moore told the panel.
In a surprise appearance, Gov. LePage came before the committee to argue on behalf of his proposal. He says that as of July first of last year, the retirement system was reporting an increase in the unfunded liability of over $300 million. That’s the cost of providing benefits to workers and teachers who were allowed into the system in the past without being fully funded. He sympathizes with retirees, LePage says, but the system can’t afford to give out any additional increases and still meet its obligations to future retirees.
“Do I wish that the state of Maine could afford, through the earnings of the retirement system, to pay a cost of living adjustment? Absolutely, yes. That would be great. But the returns are simply not there.”
Maine’s Constitution includes a provision that requires lawmakers to appropriate enough money every year to ensure that the system will pay benefits in the future and to eliminate unfunded liability. And LePage reminded lawmakers that there’s a deadline included. The Constitution requires the unfunded liability be erased by 2028.
“Notice that the Maine Constitution does not mention cost of living adjustments. It mentions the unfunded liability.” he says.
And LePage told the panel he believes further reforms are needed to make sure the system can pay benefits to future retirees. He says he supports a study sponsored by Rep. Tom Winsor (R-Norway) to look at alternatives. A similar study was done four years ago and went nowhere. It found that if the state developed a program built on Social Security as a base, it would cost the state considerably more than the system that is currently in place.