AUGUSTA — Unions representing teachers and state workers proposed changes to their retirement benefits Thursday to counter reductions sought 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 turn 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 are willing to accept changes to cover a deficit created by the stock market declines of 2008.

The unions said they recognized the need to made modifications to put the state on a path to pay off short- and long-term debt by 2028, as 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 costs to the state of Maine which are generated by the 2008 market declines,” Chris Quint, executive director of the Maine State Employees Association, said at a State House news conference.

The changes proposed by the unions total $213 million in savings for the two years beginning July 1, 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 non-starter.”

Millett expressed a willingness to consider changing the governor’s proposal for health insurance. As proposed, his budget would require teachers and state workers who retire before they turn 65 to pay for their health insurance. The state now pays 100 percent for state workers and 45 percent for teachers before they turn 65.

Next week, the administration may recommend a change similar to what the unions are proposing for health care when it introduces a series of modifications 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 to save money in the short term and 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 would require current employees to increase their contribution to the system by 2 percentage points of their pay, which would correspond with a nearly 2 percentage point drop in the state share.

It also would increase the retirement age to 65 for new hires and workers with less than five years of experience.

Millett said the budget is built around the changes to the retirement system, to 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.”

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,” said Mark Gray, executive director of the Maine Education Association.

The union officials said they would be willing to consider other changes — such as raising the retirement age, introducing Social Security, a constitutional amendment to extend the payback period for the system’s debt — at 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.”

 

MaineToday Media State House Writer Susan Cover can be contacted at 620-7015 or at:

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