Republicans raiding state retirement again

Back in 1990 the McKernan administration balanced the state budget by “borrowing” $73 million from state retirement funds. Even worse, the amount the state contributes to employees’ retirement was reduced to 5.5% from 7.65%. Employees’ contributions remained at 7.65%.

Fast forward to 2011 — the unfunded deficit has grown to $4.3 billion as subsequent administrations have conveniently ignored the retirement fund’s chronic underfunding.

Now the LePage administration has decided that the problem is the employees’ fault and plans to shift even more of the funding to teachers and state workers. LePage plans to further reduce the state share of funding to 3.5% from 5.5%. This would mean state workers and teachers would pay a whopping 9.65% of their salaries to the retirement fund. Teachers also have to pay 1.45% to Medicare so the real figure is 11.1%. This compares to a worker under Social Security who only pays 7.65% (4.2% in 2011).

The state retirement fund has saved millions for taxpayers versus having to pay for Social Security. However, a 1995 Constitutional Amendment requires 100% funding by 2028. (It was 66% funded in 2010.)

Only 13% of teachers ever remain employed long enough to receive the full vesting of their retirement (25 years). This further saves the state and taxpayers over Social Security under which 100% eventually vest.

In order for state retirement to replace Social Security it must be an IRS-Qualified Replacement Plan. Whether or not it is qualified, the changes certainly are not fair. Gov. LePage is fond of describing how business is done in the private sector. In the private sector, businesses pay at least 50% of retirement contributions, many offering far more in 401ks. Obviously, changes need to be made, but the state should not force all the sacrifices on the employees with none on the state. — SS

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